Nikola to face off with Trevor Milton amid share dilution fears

Nikola (NASDAQ: NKLA), a startup building electric and hydrogen trucks, is bracing for a major showdown with Trevor Milton, its founder. The highly embattled company will hold its annual general meeting a day after its share offering vote closes.

Trevor, who has a 7% stake in the company, is opposed to the idea of doubling the number of outstanding shares in the company. This expansion will give the company more flexibility to raise capital to fund its manufacturing.

Trevor Milton believes that the company does not need to raise more money. Instead, he believes that the management should be replaced with more competent ones. Nikola’s management, on the other hand, has accused Milton of sabotage and breaking the law. 

Like other electric vehicle companies, Nikola has been under pressure in the past few years. It has burnt its cash and analysts believe that it needs additional capital. Its most recent results showed that the company had over $121 million in cash, down from $840 million in 2020.

This cash is fizzling fast as the company’s net loss rises. The company had a net loss of more than $169 million in the first quarter. It has lost over $800 million in the four quarters. Therefore, the company will likely need more capital soon.

Nikola has no good solutions ahead, which explains why its stock has plunged by over 71% in the past 12 months. Existing shareholders are guaranteed to either be diluted or be wiped out if the company files for bankruptcy.

Unlike most companies, Nikola has a large army of individual investors. It has over 700k individual investors, meaning that Milton has a limited role in the vote. 

Nikola needs a lot of money as it gears towards the launch of its hydrogen-powered trucks. History suggests that EV companies continue burning cash even after starting commercial production. For example, companies like Rivian and Lucid Motors have lost billions of dollars since starting production.