Shares of Nikola Corp. experienced their fourth consecutive loss on Friday following the disclosure of a convertible debt offering. The electric vehicle maker declared that it would be offering $40 million of senior notes with an interest rate of 5.0%, set to mature on September 22, 2024.
Convertible Notes and Offering Completion
The offered notes will be convertible into shares of common stock, cash, or a combination of both at any time. Nikola Corp. expects to complete the offering by the end of the day on Friday.
Recent Performance and Market Reaction
Pre-market trading on Friday saw a 2.3% drop in Nikola’s stock price after a significant 18.2% decline over the past three sessions. This sudden decline came after a remarkable 82.8% surge in the stock’s value during the previous three sessions. The surge was fueled by the announcement from Chief Executive Steve Girsky about the imminent delivery of the first hydrogen fuel cell trucks by the end of this month. Additionally, the appointment of a chief operating officer, who previously served as a managing partner of the special-purpose acquisition company (SPAC) that took Nikola public, also contributed to the stock’s recent growth.
Impact of Convertible Debt Offerings
It is commonplace for a company’s stock to be negatively affected when convertible debt offerings are announced. Shareholders often express concerns about potential dilution of their ownership if the debt is ultimately converted into common shares.
However, for Nikola, the convertible debt offering serves as a means to address their capital raising needs. In their quarterly statement filed in August, Nikola expressed doubts regarding their ability to continue as a going concern for the next 12 months. The company emphasized the significance of accessing capital as an early-stage growth company. Until sufficient revenue is generated to cover operating expenses, working capital, and capital expenditures, Nikola will require additional capital.
Financial Overview
Nikola reported $15.4 million in revenue for the second quarter ended June 30, down from $18.1 million during the same period the previous year. As of June 30, the company’s cash and cash equivalents amounted to $226.7 million, a slight increase from $225.9 million at the end of December but a significant decline from $441.8 million a year ago.
Comparative Performance
Nikola Corp.’s stock has experienced a 5.8% decrease over the past three months and a substantial 39.8% decline year-to-date. In contrast, the Global X Autonomous & Electric Vehicles ETF (DRIV) has seen a 17.6% increase this year, while the S&P 500 index (SPX) has gained 12.8%.