Nikola (NASDAQ:NKLA), once a fervently followed meme stock, has seen a tumultuous journey, shedding over 12% of its value in 2024 and a staggering 95% over the past three years. Amidst conflicting sentiments of potential multi-bagger status and impending bankruptcy, a deeper examination of the company’s trajectory is warranted.
SPAC Fallout and EV Bubble Burst
Nikola’s descent mirrors the fate of several startup green energy companies, including Arrival, Bird Global, Lordstown Motors, Electric Last Mile Solutions, and Proterra, all of which succumbed to bankruptcy post their SPAC mergers. The euphoria surrounding the EV industry culminated in a bursting bubble, exacerbated by the Federal Reserve’s aggressive rate-hike campaign in 2022, withdrawing the lifeline of easy money that sustained many cash-strapped startups.
Troubles Beyond Macroeconomic Headwinds
Nikola’s challenges extend beyond macroeconomic factors. Accusations of fraud by Hindenburg Research, leading to founder Trevor Milton’s resignation and subsequent fraud conviction, tarnished the company’s reputation. Similar allegations befell Lordstown Motors, which subsequently filed for bankruptcy, highlighting a pattern of mismanagement within the sector.
Evolution of Nikola
Nikola has since distanced itself from Milton and pivoted its focus towards hydrogen fuel cell electric trucks and infrastructure solutions, jettisoning ventures like the Badger pickup truck program and its European operations. While a substantial cash reserve of $464.7M at the close of 2023 bolsters its financial standing, it comes at the expense of a significantly bloated outstanding share count, compounded by generous stock-based compensation.
2025 Outlook and Cautionary Tale
CEO Steve Girsky’s optimism for a positive cash contribution margin on every truck by 2025 hinges on improving selling prices and reducing production costs. While Nikola anticipates a shift towards positive EBITDA in 2025, caution remains warranted. Despite newfound focus and market targeting, the company’s turbulent C-suite history and persistent risks render it a risky prospect for multi-bagger potential.
Conclusion
While Nikola’s strategic refocusing may offer a semblance of stability, prudent investors are advised to exercise caution. Amidst uncertainties surrounding its ability to execute its turnaround strategy and navigate a competitive landscape, alternative investments in more established players within the startup green energy sector may offer more reliable prospects for long-term growth.
Featured Image: Megapixl
Author Faith Yakubu 
