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June 22, 2022 2:20 PM, EDT

Nikola Asks Shareholders to Approve Big Jump in Outstanding Shares

NikolaThe Nikola Tre BEV. (Johnny Jaffe/Nikola Corp.)

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Truck maker Nikola Corp. is hoping to gain shareholder approval at its annual meeting for the company’s proposal to increase the number of shares outstanding and thus raise more money by selling equity.

Four proposals are up for a shareholder vote, but Nikola CEO Mark Russell wrote in a shareholder letter one was “particularly important as it allows us to increase the number of shares of our company’s common stock and requires an affirmative vote from the majority of all outstanding shares for approval. Only votes actively cast ‘FOR’ this proposal are counted, so it is critical that you vote, regardless of how many shares you own. Every vote matters.”

Nikola’s largest shareholder, Trevor Milton, who founded Nikola but left as he faced charges he misled investors — exaggerating the capability of its debut Nikola One truck — reportedly opposes adding more shares, according to Bloomberg News. Milton’s criminal trial is scheduled to begin July 18 in New York.

Mark Russell

Russell

Nikola went public through a reverse merger with a blank-check company in June 2020, in a deal that made Milton into a billionaire several times over, Bloomberg noted. At one point, Bloomberg says, the company’s shares ballooned to almost $80 apiece, giving it a market capitalization greater than Ford Motor Co. despite not generating any meaningful revenue.

Nikola’s market value plunged amid the controversy. The stock was trading at $5.71 midday June 22, down from a 12-month high of $10.24.

The company reported an overall net loss for the quarter of $152.9 million, or negative 21 cents per share, compared with a loss of $120.2 million, or negative 14 cents, a year ago.

Nikola also reported it ended the first quarter with $385 million of cash and cash equivalents, including restricted cash balances. In addition, it has $409 million available liquidity through two equity lines with Tumim Stone Capital that provided it with roughly $794 million of total liquidity as of March 31.

Its capital expenditures at the end of the first quarter totaled $33.5 million and went to the construction of its Coolidge, Ariz., manufacturing facility, equipment purchases, renovations for office space expansion and hydrogen storage testing building in Phoenix, hydrogen mobile fuelers, and supplier tooling, and investments made into its European joint venture with Iveco, according to the Phoenix-based company.

Trevor Milton, CEO of Nikola Motor Co.

Milton

The company in its first-quarter earnings call reported good progress on delivering its battery-electric trucks, testing its fuel cell electric trucks, and developing hydrogen fueling stations and hydrogen hubs.

Approval of the proposal requires a majority of outstanding shares. While 64% of votes cast earlier this month were in favor of the share issuance, Bloomberg reported, that represented only 42% of shares outstanding, not enough to pass the measure without Milton’s approval or additional support from retail stock owners — hence Russell’s outreach on June 22 ahead of the virtual annual meeting June 30.

The company’s proposal would increase the number of shares outstanding to 800 million compared with 600 million now, according to Nikola.

Bloomberg said it’s not clear what Milton stands to gain by thwarting the company’s efforts to raise money, aside from not having his stake diluted. “But he could also impair its growth prospects by limiting the company’s ability to raise capital at a time when debt markets are getting frosty for startups,” Bloomberg notes.

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