Shares in hydrogen truck maker Nikola slump by 25% after chairman recommends reverse stock split

Nikola Corporation’s share price has fallen by more than 25% in the past two days after its chairman recommended that stockholders vote for a reverse stock split that would reduce the number of shares in the Arizona-based company.

Investors may also have reacted negatively to another part of Wednesday’s proxy statement to the US Securities and Exchange Commission (SEC), which referenced the attempt by disgraced Nikola founder Trevor Milton to appoint supporters to the board — a move that chairman Steven Shindler called upon shareholders to emphatically reject.

Nikola’s share price fell from $0.96 at the close of business on Wednesday to $0.72 by the end of Thursday, before rallying slightly on Friday to $0.76.

The Nasdaq exchange, where Nikola shares are traded, issued a delisting notice to the company — which builds and sells hydrogen and battery-electric trucks — in January after its share price fell below $1 for more than 30 consecutive days, in breach of the trading platform’s listing rules.

If its share price does not rise above the $1 threshold for 10 consecutive trading sessions (ie, working days) within 180 days from the issuance of the delisting notice — something Nikola has so far failed to do — it can be kicked off the exchange, although it could petition for an extension.

“Our refocused business model and financial discipline has focused on the efficient allocation of resources, reduced expenses, and increased liquidity. But there is work to be done,” Shindler wrote in the proxy statement.

“And as we move forward into 2024, we must focus on resetting our financial foundation. We need to eliminate the distraction of delisting and position ourselves to raise capital more effectively.”

The proposed stock dilution would turn between ten and 30 shares into a single share.

“The primary purpose for the reverse stock split is to increase the per-share trading price of our common stock so as to: Maintain the listing of our common stock on the Nasdaq Global Select Market and avoid a delisting of our common stock from Nasdaq in the future on the basis of the Minimum Bid Price Requirement; and [to] broaden the pool of investors that may be interested in investing in the company by attracting new investors who are prohibited from or prefer not to invest in shares that trade at lower share prices”

“In recommending its approval, the Board determined that potential benefits significantly outweighed the potential negative factors.”

In a separate part of the proxy statement, Shindler referred to the move by Nikola shareholder M&M Residiual — which he described as “an entity controlled by criminally convicted former executive chairman Trevor Milton” — to nominate a slate of new directors to the Nikola board, a move that shareholders will get to vote on at the next annual general meeting on 7 May.

Milton was convicted of securities fraud in October 2022 for making repeated false statements to investors in order to induce them to buy Nikola’s stock, including faking a working prototype of the Nikola One hydrogen semi truck in 2016.

Nikola has repeatedly stated in its financial results that there are continuing doubts over whether it can remain a going concern over the following 12 months.