Nikola tumbles to record low on $100 million stock sale

(Reuters) – Shares of Nikola Corp hit a record low on Friday after the electric-truck maker said it plans to sell shares and raise $100 million, amid high production costs.

Nikola said late Thursday it will sell about 29.9 million shares in public offering and 59.4 million shares to hedge fund Antara Capital L.P., an existing holder of the company’s convertible bonds.

Wall Street was concerned after Nikola’s offering price of $1.12 represented a 20% discount over its last close of $1.40 on Thursday.

Shares of the EV startup, based in Phoenix, Arizona, were down as much as 17.8% at $1.15 in early trading, its biggest one-day decline since January 2021.

“Despite the $100 million cash injection, management still has a lot of work to do to balance cash burn against its existing cash,” said BTIG analyst Gregory Lewis, and downgraded the stock to “neutral” from “buy”.

The company said it has $123 million in cash and $85 million in restricted cash as of March 28.

Nikola, like other smaller EV firms, has been struggling to ramp up production at a time when demand has stalled amid high borrowing costs, driven by higher interest rates.

Last year, the company had said it might sell shares to raise up to $400 million.

In February, the company had said the factors hitting demand for its battery-powered trucks were not expected to ease in the near future, after it delivered fewer than a sixth of the battery-powered trucks it made in the fourth quarter.

Other EV stocks, including Tesla Inc, Rivian Automotive Inc, Lordstown Motors Corp and Lucid Group Inc, are all up between 2% and 6%.

(Reporting by Tiyashi Datta in Bengaluru and Lance Tupper in New York; Editing by Pooja Desai)