I predicted the Nikola (NKLA) stock price crash: here’s what I expect

Nikola Corp (NASDAQ: NKLA) stock price collapse continued its remarkable collapse on Thursday after the company raised more cash, as I had predicted. The shares tumbled by over 20% and reached its lowest point since June. This crash makes it one of the worst-performing companies in Wall Street after crashing by 64% in 2023.

Nikola Motors is raising more cash

Nikola Corporation, the embattled fuel cell company, announced a new plan to dilute its existing shareholders. The firm announced that it will offer $100 million in additional common stocks and $200 million in Green Convertible Senior Notes.

The company aims to use these funds to cover its working capital and other general purposes. This new capital raising comes at a time when Nikola has been diluting its shareholders for years. It had 29.6 million outstanding shares in 2018 and over 992 million today. With the new offering, the company will have over 1.2 billion shares.

I believe that this will not be the final capital raising for Nikola. In its most recent earnings, the company had $364 million in cash and short-term investments, up from $243 million in the previous quarter. That increase was because of another capital raise. 

Nikola will be in need for more cash because of its substantial losses. The company had a net loss of more than $425 million in the last quarter. It has lost over $1.2 billion in the last five straight quarters. 

This loss-making will go on for a while even when it starts to sell its fuel cell trucks. We have seen this with other companies in the industry like Rivian and Lucid, which have lost billions of dollars as they ramp their production.

Nikola faces many challenges

NKLA chart by TradingView

Nikola has other challenges that it needs to contend with. It is in an industry that has yet to be proven and its hydrogen-powered trucks are still more expensive than diesel ones even with the subsidies. In most cases, the cheapest hydrogen truck starts at about $450k, thrice that of a diesel truck.

The hydrogen infrastructure is also not adequate in the United States and California, where it intends to focus on. For example, recently, we have seen Plug Power go through substantial challenges as it builds its infrastructure. 

Most importantly, fueling a hydrogen truck is not cheap since the market is still small. In most cases, fueling a fuel truck is two to four times more expensive than diesel. As such, it is unclear whether customers will be comfortable paying more for an unproven truck that costs more to fuel than a diesel one.

The shift to hydrogen trucks and EVs is being fueled by government mandates, especially in California. However, the reality, as we have seen with EVs, these mandates and incentives cannot force people to buy these products.

Therefore, I believe that the future of Nikola is uncertain. Besides, the company has already issued its going concern warning. As such, in the long term, I expect that the stock will continue falling as demand wanes.