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November 10, 2020 9:30 AM, EST

Nikola’s Losses Widen in Third Quarter

Nikola BadgerThe Nikola Badger. (Nikola Corp.)

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Zero-emission truck developer Nikola Corp. saw losses grow as it spent heavily on research and development and legal fees during the third quarter.

It also updated investors, saying it started assembling its first battery-electric Class 8 Nikola Tre truck prototype and still is working to seal a venture with General Motors Co.

The Phoenix-based startup said its Q3 loss widened to $117.3 million from $15.5 million in the same period a year earlier. That amounted to a loss of 31 cents per diluted share compared with a loss of 6 cents in Q3 of 2019.

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The Nikola Tre

The Nikola Tre (Nikola Motor Co.)

As a startup, the company has yet to record revenue. The loss broke down between $51.5 million in research and development spending and $86.8 million in selling, general and administration expenses.

Nikola’s strategy is to develop battery-electric Class 8 trucks for short distances and hydrogen fuel-cell tractors for longhaul freight, CEO Mark Russell said, in a Nov. 9 call with industry analysts.

In September, Nikola and GM announced an agreement to bring the startup’s Badger electric and fuel cell pickup truck to market. Nikola planned to issue $2 billion in stock to GM. The Detroit automaker would get an 11% stake in Nikola, a seat on its board of directors, and engineer and produce the Badger.

But that deal stalled after Hindenburg Research issued a Sept. 10 investment report on Nikola. The report alleged that Nikola founder Trevor Milton made misleading statements about the company and exaggerated its technology. Hindenburg focuses on so-called short investments, in which investors make money when a company’s stock drops.

Milton subsequently resigned as executive chairman and gave up his seat on Nikola’s board of directors. He was replaced by Steve Girsky, a former GM executive.

The Securities and Exchange Commission is investigating the charges. Russell said Nikola is cooperating with information requests from the commission and the Department of Justice. The company has denied the substance of the charges.

Trevor Milton and Mark Russell

Milton (left) and Russell

Russell said the probe has created “a lot of speculation about our ongoing discussions with GM.”

The deal has not closed, and the companies remain in discussions, Russell said. Chief Financial Officer Kim Brady said the company should “have greater clarity in the coming weeks.”

Other portions of Nikola’s strategy are moving forward, Russell said.

A heavy-duty truck partnership between Nikola and Turin, Italy-based Iveco started to assemble the first five prototypes of the Nikola Tre battery-electric tractor at a refurbished factory in Ulm, Germany.

The first truck is undergoing systems checks, such as charging and discharging the high-voltage batteries. Engineers are tuning other systems such as the e-axles to prepare for testing in the first quarter of 2021.

The companies expect to complete the assembly of all five prototypes by the end of this year. The venture will start on a second batch in the first quarter.

Nikola also is building a truck factory in Coolidge, Ariz. Construction is underway, and the first phase of the assembly shop will be completed by the end of next year, Russell said.

The company plans to build up a supply chain in North America as it wants to match supply chains to the geography where its trucks will be sold, he said.

 

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Nikola also continues to increase staff. It had 429 employees at the end of Q3 and expects to end the year with 530.

Nikola ended the third quarter with $908 million in cash.

At some point, Nikola plans to raise additional capital in a stock sale.

“It depends on the market condition and the optimal time and when we can minimize dilution in our shares,” Brady said.

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