What happened

Start-up electric heavy truck maker Nikola (NKLA 7.23%) didn't have all bad news in the month of August, but it seemed like it to investors. A string of troubling news and updates led to a drop of nearly 56% in Nikola shares last month, according to data provided by S&P Global Market Intelligence.

So what

Last month's crash came after Nikola stock had marched higher throughout June and July as the company began generating meaningful revenue and made moves to solidify its financial position. Nikola sold its Arizona hydrogen hub to Australia-based Fortescue Future Industries (FFI) to help lower its capital spending requirements and bring in needed cash, and it announced other partnerships for hydrogen supply and fueling infrastructure. The company also announced an agreement with J.B. Hunt Transport for the sale of 13 Nikola electric trucks to the well-known trucking company.

But the tide turned in August for the company and its stock. After an independent third-party investigator released a preliminary report on a previously announced truck fire, Nikola said it would recall 209 of its battery-electric trucks. A coolant leak in a battery pack component was identified as the likely cause of the fire. 

Nikola also said its CEO was stepping down and that the chairman of Nikola's board of directors would take over. At the same time, the company said it had entered into a new agreement with investors to sell as much as $325 million in convertible bonds. It will immediately raise about $125 million for the company. While additional capital will be helpful for any long-term success, a sale of convertible bonds could result in share dilution if those bonds are converted to common shares.

Now what

There may be further dilution coming as well, since Nikola shareholders approved a company proposal to allow it to increase the number of common shares. While this was a necessary step, it put short-term pressure on the shares.  

The most significant news from last month may be the recall, however. We don't know yet how much the fixes will cost. But the more than 200 vehicles affected are a significant portion of what the company has produced so far. A total of 96 trucks had been produced in the first six months of 2023. 

The good news for shareholders is that Nikola doesn't expect the recall of the battery electric trucks to affect the timeline for its hydrogen fuel cell truck production. The company says it has orders for over 200 of its hydrogen fuel cell electric trucks and is finalizing testing on the initial vehicles. It hopes to begin shipping them to customers this month. 

Even after the August plunge in the stock price, Nikola still has a market cap of about $1 billion. How the recall costs pan out, and how the rollout of its hydrogen trucks progresses, should be what investors watch to determine how the stock moves next.