Nikola
stock was falling in premarket trading Thursday. The company is raising more money.
Shares of the hydrogen trucking and technology company were down 20% at 79 cents apiece.
Nikola
stock closed up 1.3% in regular trading at 98 cents a share, while the
S&P 500
and
Nasdaq Composite
fell 0.4% and 0.6%, respectively.
The drop came after Nikola announced plans to raise about $100 million via the sale of common stock and $200 million via the sale of convertible notes.
Nikola’s market capitalization at the close of trading on Wednesday was about $1 billion, so the capital raise is significant relative to its market value. Large capital raises can drive shares lower because existing shareholders end up owning less of the company.
Nikola ended the third quarter with about $700 million in cash and liquidity. The company used about $112 million in cash during the third quarter, according to FactSet. Wall Street projects almost $500 million in cash needed to fund operations for the coming four quarters.
Positive free cash flow isn’t expected for the next few years, which is as far out as analysts have forecast numbers.
Nikola stock is down about 59% over the past 12 months. Higher interest rates and a slowing economy have sapped investor enthusiasm for shares of start-up companies that don’t generate positive earnings or cash flow.
Throughout its life as a publicly traded company, Nikola has used about $1.9 billion to build its business. Nikola plans to produce hydrogen fuel cell-powered trucks and the hydrogen gas that makes them run.
Hydrogen, if produced using water and renewable energy, doesn’t generate any carbon dioxide gas when created or used for transportation. Carbon dioxide is the main gas blamed for global climate change.
Nikola began producing its hydrogen fuel-cell trucks in late July. Some early production is with customers for testing.
Write to Al Root at allen.root@dowjones.com
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