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Nikola Can Only Blame Itself for Punishing Stock Meltdown

Last Updated September 23, 2020 2:10 PM
Mark Emem
Last Updated September 23, 2020 2:10 PM
  • All of Nikola’s quarterly revenue came from a single customer – its founder.
  • Weeks after a groundbreaking ceremony, there doesn’t appear to be any activity at the automaker’s Coolidge, Arizona plant site.
  • Nikola stock is down by over 60% since hitting a record high in June.

Nikola’s first-ever quarterly report as a public company was supposed to come and go without incident. With no earnings to speak of, what could go wrong?

Then a curious thing happened. Nikola Motors (NASDAQ: NKLA) announced it had generated $36,000 in revenue  during the quarter that ended in June.

Although nobody expected Nikola to generate any revenue, the figure still sparked chuckles, considering the company boasts a $14 billion valuation.

It raised questions too.

Nikola’s earnings report raises eyebrows – and questions

Per the quarterly report, the sole source of the revenues was the “provision of solar installation services to the Executive Chairman” and founder Trevor Milton.

In the June quarter, Nikola’s sole source of revenue was its founder and executive chairman Trevor Milton. | Source: @thestinkmarket/Twitter 

Yep, the founder was the only client of Nikola’s solar installation business. This raised a lot of eyebrows and – even more questions.

For example: Were the services competitively priced?

Even more curious is the fact that solar installation is not Nikola’s primary business.

The SEC quarterly report says:

Solar installation projects are expected to be discontinued and are not part of our primary operations.

Was this temporary “revenue stream” started solely to serve the company’s executive chairman’s interests?

What is Trevor Milton thinking?

nikola stock, trevor milton
Does Trevor Milton have anyone around him to stop him from making poor decisions? | Source: REUTERS/Massimo Pinca

The whole incident reeks of a lapse in judgment. Nikole is a public company. Why didn’t Milton have the sense to hire an outside firm to install solar panels on his private property?

Even if you assume everything was done above board, it’s hard to escape the appearance of a conflict of interest.

The fiasco is par for the course for Nikola. The “automaker” is the constant subject of ridicule on social media, in part due to its over-reliance on computer renderings to promote its products  that don’t exist yet.

Trevor Milton
Nikola has relied heavily on computer renderings, raising a fair amount of skepticism in the process. | Source: @PunchableFaceVI/Twitter 

Nikola’s rivals, including Rivian and Tesla (NASDAQ: TSLA), all started accepting reservations after showcasing working prototypes.

That was too much of a hassle for Trevor Milton and company.

And after opening reservations on a truck with no prototype and nothing more concrete than basic computer renderings, Nikola has declined to reveal the exact number of preorders it has received.

A little more transparency on Nikola’s part would go a long way toward assuring shareholders the company warrants its lofty valuation.

An empty piece of dirt in the middle of the desert

Nikola’s sluggish progress in beginning the construction of its plant in Coolidge, Arizona, is another cause for concern.

Nikola founder and executive chairman Trevor Milton has fiercely defended the slow progress at its factory site in Arizona. | Source: @ajtourville/Twitter 

Weeks after the groundbreaking ceremony, there seems to be little activity at the site.

Video: Nikola doesn’t seem to be rushing to begin construction of its Arizona factory

Milton has been quick to assure  everyone that “tractors are like the least important thing” about building a plant, though.

Video: Trevor Milton “explains” the lack of progress at the Coolidge factory site

If Nikola wants to instill confidence in investors, it has a lot of ground to cover – and not just in Coolidge.

Otherwise, shareholders are going to scurry for the exits just as quickly as they hopped on board the company’s 3D-rendered hype-train.

Nikola stock plunges back to where it started

nikola stock
Nikola stock has careened well off the highs it reached in June. | Source: Yahoo Finance 

After opening at $37.55 following its public listing in June, Nikola stock soared by 150%  in a matter of days. Before long, it peaked above $90 per share.

Then the pullback began.

Less than two months after briefly becoming America’s third most valuable automaker, NKLA shares have plunged back to $37.55 – exactly where they started.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author has no position in any of the stocks mentioned.