There is a new blocker. And the stock was feeling it in early trading.
Hindenburg Research published a lengthy report Thursday morning detailing a list of problems the firm has had with Nikola (ticker: NLKA). At its core, the report reflects an assumption that Nicola management overstalled its internally developed battery and fuel-cell capabilities.
Nicola shares are down about 8% shortly after opening at $ 38.96. This still leaves the stock up about 10% for the week. Shares rose 41% on Tuesday after announcing a partnership with the company
The GM deal plays an interesting role in the Hindenburg Report. GM is getting an 11% stake in the company and agrees to provide Nikola with hydrogen fuel cells and batteries for its vehicles. GM will also provide engineering support and build the company’s Badger pickup truck. Nikola will be responsible for selling and marketing the badger.
Wall Street wrote that the agreement validated Nicola’s trading strategy and made its stock less risky. In a sense, Nikola, prior to the GM deal, had the ability to design and source batteries and manage fuel cells and build vehicles to fill hydrogen to fuel its planned zero-emission heavy-duty trucks. Used to build a nationwide network of stations. .
The deal may indicate that GM’s fuel-cell and battery technology being developed internally by the startup is superior. The company did not comment on its R&D efforts, but did say Baron’s An emailed statement said: “Nicola has been sold by some of the world’s most trusted companies and investors. We are on the road to success and will not forgive based on reports full of misleading information trying to manipulate our stocks. ”
Following the GM deal, Nikola has less exposure to battery and fuel-cell development as well as manufacturing-related risks. The stock is still a bet on the company’s ability to provide low-cost hydrogen gas for its fuel cells. Nicola believes the cost of manufacturing this hydrogen could be less than $ 4 a kilogram, a level that would make the fuel competitive with diesel.
Wall Street has raised some questions about Nikola’s battery technology. For example, Cowen analyst Jeffrey Osborne commented on Nicola’s November 2019 claims that it developed a battery with twice the energy density of the prevailing technology.
Osborne wrote in his June report, “In subsequent press interviews, it became clear that Nicola constructed these cells only with the small causative sac cells needed in a vehicle or truck.” Nikola’s battery technology was not ready for production.
Osborne bought Nicola’s shares and set a street-high $ 79 price target for the stock.
Hindenburg revealed in its report that it was a small Nicola stock. When shortening, recession investors borrow the stock and sell it, placing bets on price declines. This is not uncommon when a small report is published, but it does give Hindenberg a financial interest to see Nicola stock down.
Niloka stock is still around 240% since its announcement to become a publicly traded entity through a merger with SPAC in early March.
Dow Jones Industrial Average
By comparison, in the same period it is up to 9% and 14% respectively.