The bottom line on Nikola (NKLA) is that with founder and executive chairman Trevor Milton now out, the EV must step up its game big-time to ease investor concerns around the company’s technology and future.
Or else the stock could fall further right through the trap door it recently stepped through.
“Nikola just has to execute and prove out its electric vehicle vision. That’s the focus for investors especially with Trevor out,” Wedbush analyst Dan Ives tells Yahoo Finance. Ives continues to rate Nikola shares a Neutral with a $45 price target (current Nikola stock price: $27.30).
At the moment, Nikola investors are more fixated with the drama around Milton’s surprise departure on Sunday than execution.
Shares of Nikola fell as much as 30% on Monday as Milton’s exit amid recent allegations from short-seller Hindenburg Research that he misled investors — which reportedly has the SEC snooping around Nikola’s house — thrust the upstart into fresh tumult.
“I asked the Board of Directors to let me step aside from my roles as Executive Chairman and a member of Nikola Board of Directors. The focus should be on the Company and its world-changing mission, not me. I intend to defend myself against false allegations leveled against me by outside detractors,” Milton wrote in a statement posted on his Twitter account early Monday morning.
It’s unclear if Milton plans to keep his 20% stake in Nikola (any selling would pressure shares further) as he is no longer involved with the company. Moreover, questions continue to swirl on what proprietary technology Nikola in fact has and the timeline in bringing it to life via hydrogen-powered refuel stations, semi trucks and a pickup truck.
In short, confidence in the once high-flying Nikola is seen as severely dented on Wall Street.
Restoring that confidence will now mostly fall on former General Motors vice chairman and existing Nikola board member Stephen Girsky who replaces Milton in the executive chairman position. The former long-time Morgan Stanley auto analyst turn CEO of VectorIQ — the SPAC Nikola merged with months ago that brought Girsky on Nikola’s board — will have to focus in on two things in the near-term to stem the stock selloff.
First, closing the $2 billion investment deal with General Motors on the outlined Sept. 30 deadline. GM CEO last voiced confidence on the tie-up about a week ago. But the company has not commented in the wake of Milton’s exit. Given Nikola’s plunge — and rising concerns on the company — since the deal was announced on Sept. 8 it’s reasonable to expect some aspects are renegotiated.
“We acknowledge Trevor Milton’s departure from Nikola and the decision of the Nikola Board to move forward. We will work with Nikola to close the transaction we announced nearly two weeks ago to seize the growth opportunities in broader markets with our Hydrotec fuel cell and Ultium battery systems, and to engineer and build the Nikola Badger,” said GM in a statement.
And secondarily, Girsky will have to more explicitly detail release timelines for Nikola’s semi-truck and what technology in the truck is proprietary to Nikola. A line by line list of proprietary Nikola technology would go a long way to easing some investor worries.
“While there will be a lot of worries on the Street around Trevor's departure especially in light of the bear noise recently with the company, going forward Nikola has a strong bench and now it's all about execution going forward with the GM partnership a linchpin to its success,” says Ives. “In a nutshell, Nikola is still a ‘prove me’ stock, which speaks to why we are watching this from the sidelines.”
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