EV maker to sell $40 million worth of debt due next year, payable in common stock and/or cash
Shares of Nikola Corp. dropped Friday for fourth-straight day, after the electric vehicle maker disclosed a convertible debt offering.
The company NKLA, -3.85% said late Thursday that it was offering $40 million of senior notes that bear an interest rate of 5.0% and will mature on Sept. 22, 2024.
The notes will be convertible “at any time” to shares of common stock, cash or a combination of both.
Nikola said it expected to complete the offering on Friday.
The stock slumped 3.9% in morning trading Friday, and has tumbled 21.4% amid a four-day losing streak.
The pullback comes after the stock had rocketed 82.8% in the previous three sessions, after Chief Executive Steve Girsky said the first hydrogen fuel cell trucks would be delivered by the end of the month, and after the company named a chief operating officer, who was a managing partner of the special-purpose acquisition company (SPAC) that took Nikola public.
Announcement of convertible debt offerings often hurts a company’s stock, as shareholders express concern that their ownership will be diluted by if the debt is converted to common shares.
For Nikola, the offering helps address a need to raise capital.
In Nikola’s quarterly statement filed in August, the company expressed “substantial doubt” about its ability to continue as a going concern through the next 12 months.
“As an early stage growth company, the company’s ability to access capital is critical,” the company said. “Until the company can generate sufficient revenue to cover its operating expenses, working capital and capital expenditures, the company will need to raise additional capital.”
The company reported revenue of $15.4 million for the three months ended June 30, down from $18.1 million in the same period a year ago.
The company had $226.7 million in cash and cash equivalents as of June 30, up from $225.9 million on Dec.31, but down from $441.8 million a year ago.
Nikola’s stock has lost 9.4% over the past three months and has plunged 42.1% year to date. In comparison, the Global X Autonomous & Electric Vehicles ETF DRIV has climbed 19.1% this year and the S&P 500 index SPX has gained 13%.