Al Root

Shares of Nikola dived in early trading Friday after a report said the hydrogen and electric truck technology company was nearing a bankruptcy filing.

Nikola stock was down more than 28% at 54 cents in premarket trading. Futures for both the S&P 500 and Dow Jones Industrial Average futures were rising slighty.

The stock move came after The Wall Street Journal reported Thursday that the company was working with advisors to explore options to restructure its debt.

The company didn't immediately respond to a request for comment from Barron's. A Nikola representative told the Journal the company continues to assess its financial position and liquidity needs, and is evaluating a number of options including financing as part of a financial restructuring.

Nikola ended the third quarter with about $270 million in long-term debt and $200 million in unrestricted cash.

The company hasn't generated free cash flow yet and has been using about $150 million per quarter. Wall Street doesn't see that pace changing in upcoming quarters. The cash use for 2025 is about $615 million, according to FactSet estimates.

Nikola played a role in the boom of special purpose acquisition companies, or SPACs, earlier this decade. A SPAC will raise money in an initial public offering and look to merge with a private company. After a merger, the once privately held company will be publicly traded and have the cash raised by the SPAC. The process can be less burdensome for a private company than a traditional initial public offering.

Nikola completed its SPAC merger in mid-2020, and shares traded above a split-adjusted $2,800 apiece, up nine-fold from pre-SPAC levels, brieflygiving the company a market value comparable to Ford Motor.

Nikola's early days as a public company were particularly dramatic, with a potential investment from General Motors and its founder Trevor Milton, who was accused of faking some development milestones. Milton was convicted of securities fraud in 2022.

Nikola's valuation helped many other EV and hydrogen technology start-ups raise money. Few are still standing. Fisker, Canoo, Lordstown Motors, and Hyzon are a few that were forced to restructure operations after failing to reach the scale required for sustainable operations.

It appears Nikola might join that list.

Write to Al Root at allen.root@dowjones.com

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February 07, 2025 07:37 ET (12:37 GMT)

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