What happened
Nikola's (NKLA +0.00%) stock price is still more than twice what it was three months ago, but it has tumbled from the recent peak hit in the first week of August, when it was up by more than 500% from its early June low. That slide continued Monday morning as the stock fell by more than 18%. As of 11:06 a.m. ET, shares of the electric truck maker remained down by about 18.3%.
OTC: NKLA
Key Data Points
So what
Two items from new filings by Nikola were driving the stock lower as the trading week began. The company said it had entered into a new agreement with investors to sell as much as $325 million in convertible bonds. It expects to close the initial tranche, which will raise about $125 million for the company, on Monday. And as with any sale of convertible bonds, this one raises the possibility of share dilution down the road.
But what may have spooked investors even more was another item included in the company's filings. Nikola recently recalled about 200 of its battery electric trucks due to a safety issue. A coolant leak in a battery pack component was identified as presenting a fire risk, and that issue has to be addressed.
On Monday, the company provided more details about the risks related to the recall, and stated: "We may incur significant expenses as a result of these events and there can be no assurance as to when we will be able to resume production of our [battery electric] trucks. As a result, our brand, business, results of operations, financial condition and cash flows may be adversely affected."
Now what
Investors shouldn't overreact to that risk statement, though. Many potential risks are included in company filings. But it is worth watching to see how long it may be before battery electric truck production resumes -- and how much the problem will cost the company.
Nikola has recently retooled its production line to enable the production of its hydrogen fuel cell trucks along with the battery electric versions. The company is hoping the fuel cell models will make up the majority of its future production. Building out the infrastructure needed for the hydrogen trucks is also the main reason Nikola needed to raise capital. That piece of news wasn't unexpected, but the anticipation of future common stock dilution had investors selling anyway on Monday morning.
