2023-06-16 10:33:00
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Nikola stock has staged a massive rally over the past few trading days. The reasons for the price explosion are speculative, because there is no company news that could move the price. However, many market observers feel reminded of 2021.
• Nikola stock in dire financial straits
• Massive price increase in one week
• Memories of meme stocks are awakened
Hydrogen truck maker Nikola has been in turmoil for quite some time. The business is in high deficit, as a look at the latest quarterly balance sheet shows: In the past financial quarter, Nikola made a loss of 169 million US dollars with weak revenues of 11.1 million US dollars and has slipped even further into the red. In addition, there was bad news from other quarters: The group is threatened with delisting from the US stock exchange NASDAQ because Nikola does not meet the minimum requirements for the offer price. The reason is a massive crash in Nikola shares – in 2022 alone, the share certificate lost 78.12 percent in value and slipped below the one dollar mark. For more than 30 consecutive business days, Nikola stock has closed below the magic $1 mark, failing the minimum requirements to remain on the NASDAQ.
Nikola stock on NASDAQ with sudden recovery rally
Nikola now has until November 20 to avert the stock market exit, and a look at the share price development over the past few days shows that there no longer seems to be an acute risk of being kicked out of the tech stock exchange. Because the Nikola share recently put a massive rally on the floor: within a week of trading, the share price rose by 150 percent, on Thursday alone the share shot up by 29.63 percent and closed at 1.40 US dollars.
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The reasons for the sudden price recovery are not clear at first, because nothing has changed in Nikola’s precarious financial situation in the past few days. The hydrogen truck manufacturer still urgently needs fresh capital, even if the chances of this are likely to have improved slightly after the recent price rally.
It was only at the end of May that Nikola appealed to its shareholders to approve a capital increase at the annual general meeting, which was postponed to July 6th. This vote is still pending. But there is increasing speculation on the market that a reverse split could turn things around at Nikola: With such a capital measure, a stock corporation pools shares instead of issuing new ones – this reduces the number of shares and increases the stock market price. A higher share price, in turn, could be useful in raising capital and at the same time alleviate some of the pressure of an imminent delisting.
Since any capital measures have not yet been decided, the generally positive mood in the sector could also have supported the share price. Because not only the Nikola share has risen sharply in the past few days, other industry representatives such as Ballard Power and Plug Power have also recovered significantly, albeit to a lesser extent than Nikola.
Memories of GameStop are awakened
What is also striking in connection with the Nikola Rally is the extremely high trading volume – this was a multiple of the usual daily average. The short rate is extremely high and, according to “Seeking Alpha”, is 20.6 percent.
This starting point brings back memories of the meme stock hype surrounding GameStop & Co.: In 2021, retail investors and hedge funds had a showdown on the stock exchange. Agreed share purchases had caused the GameStop share to rise massively and put pressure on institutional investors in particular, who had bet on falling prices. They were forced to close out their open short positions and buy GameStop stock, which had further boosted the price.
Such a scenario could also be conceivable for Nikola in view of the high short quota – against this background, the price increase of the Nikola share could continue, at least in the short term. However, as long as the fundamental problems of the company and in particular the lack of capital resources are not resolved, it is unlikely that the price increase will be sustainable.
Editorial office finanzen.net
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