Shares in hydrogen truck maker Nikola slump by 25% after chairman recommends reverse stock split

Nikola Corporation’s share price has fallen by more than 25% in the past two days after its chairman recommended that stockholders vote for a reverse stock split that would reduce the number of shares in the Arizona-based company.

Investors may also have reacted negatively to another part of Wednesday’s proxy statement to the US Securities and Exchange Commission (SEC), which referenced the attempt by disgraced Nikola founder Trevor Milton to appoint supporters to the board — a move that chairman Steven Shindler called upon shareholders to emphatically reject.

Nikola’s share price fell from $0.96 at the close of business on Wednesday to $0.72 by the end of Thursday, before rallying slightly on Friday to $0.76.

The Nasdaq exchange, where Nikola shares are traded, issued a delisting notice to the company — which builds and sells hydrogen and battery-electric trucks — in January after its share price fell below $1 for more than 30 consecutive days, in breach of the trading platform’s listing rules.

If its share price does not rise above the $1 threshold for 10 consecutive trading sessions (ie, working days) within 180 days from the issuance of the delisting notice — something Nikola has so far failed to do — it can be kicked off the exchange, although it could petition for an extension.

In the new proxy statement — a document sent to stockholders to ensure they can make informed decisions about upcoming matters at shareholder meetings — Shindler said the company needed to “eliminate the distraction of delisting”.

Nikola posted net losses of $966m in 2023 and $784m in 2022, and is selling its new Tre FCEV hydrogen-powered trucks for about half the amount it costs to make them.

“Our refocused business model and financial discipline has focused on the efficient allocation of resources, reduced expenses, and increased liquidity. But there is work to be done,” Shindler wrote in the proxy statement.

“And as we move forward into 2024, we must focus on resetting our financial foundation. We need to eliminate the distraction of delisting and position ourselves to raise capital more effectively.”

The proposed stock dilution would turn between ten and 30 shares into a single share.

“The primary purpose for the reverse stock split is to increase the per-share trading price of our common stock so as to: Maintain the listing of our common stock on the Nasdaq Global Select Market and avoid a delisting of our common stock from Nasdaq in the future on the basis of the Minimum Bid Price Requirement; and [to] broaden the pool of investors that may be interested in investing in the company by attracting new investors who are prohibited from or prefer not to invest in shares that trade at lower share prices”

“In recommending its approval, the Board determined that potential benefits significantly outweighed the potential negative factors.”

In a separate part of the proxy statement, Shindler referred to the move by Nikola shareholder M&M Residiual — which he described as “an entity controlled by criminally convicted former executive chairman Trevor Milton” — to nominate a slate of new directors to the Nikola board, a move that shareholders will get to vote on at the next annual general meeting on 7 May.

Milton’s three nominees — which include TV personality Dave ‘Heavy D’ Sparks — “have no public company experience, no expertise or knowledge in zero-emissions truvking and energy infrastructure, and lack the significant skill sets that the current Nikola board members bring to the company”, said Shindler.

“Mr Milton has had zero involvement in Nikola’s day-to-day operations since his separation from the company in September of 2020. The Nikola team has continued to work hard to overcome the reputational, financial and operational damage created by Mr Milton’s improper conduct from more than three years ago in his role as founder and executive chairman.”

Milton was convicted of securities fraud in October 2022 for making repeated false statements to investors in order to induce them to buy Nikola’s stock, including faking a working prototype of the Nikola One hydrogen semi truck in 2016.

He was finally sentenced to four years in prison and issued with a $1m fine in December 2023, although the judge immediately released Milton on bail, pending an appeal.

In a previous statement to the SEC, Nikola wrote: “Milton seeks control of Nikola for his own financial gain. Shortly before he launched his proxy fight, Nikola obtained a $165m arbitration award against Milton. If he is able to regain control of the company Milton will undoubtedly attempt to undermine Nikola’s efforts to collect the award against him.”

Nikola has repeatedly stated in its financial results that there are continuing doubts over whether it can remain a going concern over the following 12 months.

Nikola’s share price reached an all-time high of $65.90 in June 2020, shortly before Milton’s “ocean of lies” were revealed by shortseller Hindenburg Research in September 2020 — and fell to an all-time low of $0.54 in June 2023.