Electric heavy truck maker Nikola (NKLA 7.23%) closed a chapter from its sordid past today, and investors are cheering the win. Shares soared more than 20% Tuesday morning and remained higher by 17.3% at 10:30 a.m. ET.
Nikola wins $165 million settlement
Nikola has been working to improve its balance sheet ahead of the initial deliveries of the company's flagship hydrogen fuel cell electric semi trucks. It announced the official commercial launch of those vehicles at its Arizona facility late last month. But it has also been diligently working to build its cash position, as it will probably generate revenue from those trucks slowly.
Today, the company boosted its balance sheet in a more unexpected way. Nikola announced in a Securities and Exchange Commission (SEC) filing that it has won a $165 million settlement from a lawsuit against founder and former executive chairman Trevor Milton. Milton was convicted of one count of securities fraud and two counts of wire fraud last year. Nikola sought to win damages as well as recover costs related to actions Milton has been charged with by government and regulatory authorities.
Significant reward, but not a buy signal
Since the end of the second quarter, Nikola has raised additional capital from several moves including issuing new stock and selling convertible bonds. The latter included an immediate gain of $125 million with the potential to raise as much as $325 million. In that context, the court settlement announced today is a significant sum. It also doesn't involve shareholder dilution or interest payments.
Yet in the big scheme of things, that cash won't keep the company afloat. Every dollar counts, though, and Nikola said it even plans to file to recover attorneys' fees from the lawsuit. But it will take a successful rollout and production ramp up of its hydrogen trucks for an investment in Nikola to pay off. A belief in that success is what would warrant an investment in the stock, rather than today's one-time cash gain.
