Nicola's Reverse Split Proposal Lowers Its Stock Price Even Further

Nikola Corp. is proposing a reverse split of its stock and seeks shareholder approval for this measure.

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The electric-vehicle manufacturer faces the imminent risk of delisting from Nasdaq due to its low share price, which closed at 98 cents on Wednesday and dropped further to 88 cents on Thursday. To address this concern, Nikola intends to execute a reverse split, as stated in its latest proxy filing.

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Nasdaq regulations stipulate the possibility of delisting for companies whose stock remains below $1 for more than 30 consecutive business days.

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Furthermore, Nikola believes that a reverse split could attract a broader spectrum of investors by increasing the attractiveness of its shares to those who are either unable or prefer not to invest in stocks with lower prices. This move is aimed at enhancing the company's ability to meet listing requirements while expanding its investor base.

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The proposed reverse split ratio ranges up to 1-to-30 times, with the lower limit set at a ratio of 1 share for every 10 shares. If approved by shareholders, this action would substantially decrease the total number of outstanding shares of Nikola's common stock. In a reverse split, although the price per share increases, the overall number of shares available decreases.

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Nikola's stock experienced a decline of more than 10% in Thursday morning trading, although its performance remains relatively unchanged on a year-to-date basis. However, the stock has seen a significant decrease of nearly 90% over the past two years.

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Earlier in April, Nikola disclosed that it had manufactured 43 hydrogen-electric trucks in the first quarter, surpassing its total production for the entirety of 2023. Additionally, in response to a recall of Nikola's battery-electric trucks last year, the company announced this month that it had initiated the process of retrieving its BEV 2.0 trucks from customers.

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Smaller electric-vehicle manufacturers have encountered challenges recently, as the industry requires substantial capital investment and faces intensifying competition in the market.

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