What Is The Magic Behind Nikola, the Company Pressing on Ford in Market Value, Under Twofold Stock Prices Within 3 Days of Listing?

published: 2020-06-26 13:30 | editor: | category: News

Although it may take several years before seeing if Nikola is able to blaze a trail into the truck industry through its hydrogen fuel cells, the Arizona based startup had managed to achieve a spectacular and conspicuous “beach landing” at NASDAQ, which not only raised substantial funds for the company, but also transformed Trevor Milton, the company founder, into a billionaire.

Nikola issued approximately 360 million shares, where its stock price first surged for 5% on the day of listing, then dropped slightly by 1%, and closed at US$33.75, arriving at a market value of roughly US12 billion. Just when a whole bunch of people thought that the stock price of Nikola was going to remain on the same spot, the company underwent another “cosmic explosion” when its stock price doubled (US$73.27, market value of US$26.4 billion) on the 3rd day of listing, with most shares bought by European investors. In contrast, traditional American automotive tycoon is sitting on US$30 billion of market value.

As the biggest stockholder of the company, Milton’s shares are worth US$8.1 billion, and according to the estimation of <Forbes>, the net worth of Milton is now 6 times the amount in 2019.

Investors have become increasingly interested in Nikola in recent months. According to the introduction from Milton, in addition to the NASDAQ stockholders, the company has also made connection with almost all primary OEMs in the world. Of course, apart from the impact introduced by the successful listing, Nikola has to thank Steve Girksy, former president of General Motors, for his strategies and operation in making a name of the company (differentiating from the IPO path of other startups, Nikola managed to be listed in NASDAQ due to the reverse purchase of Girsky’s listed company VectoIQ).

 “Things are starting to get interesting, since we would have never imagined to work with these companies who are rushing to collaborate with us”, commented Milton, who may be saying that Nikola is about to announce heavyweight partners. At the moment, Nikola is working with major European commercial vehicle brand IVECO on creating a battery electric truck that is expected to launch in 2021. In addition, commercial vehicle giants like Bosch and Meritor are also the working partners of Nikola.

It is reported that Nikola has acquired the US$10 billion order from Anheuser-Busch, which means that the company has to delivery 800 units of alternative fuel vehicles. Despite no existing revenue, the official “opening” next year will surge the revenue from US$150 million to US$3.2 billion in 2024. According to the planning, Nikola will sell 7,000 units of battery electric trucks and 5,000 units of hydrogen fuel cell trucks within 4 years.

Apart from semi-trailer trucks, Nikola also announced last weekend that the company will begin accepting the orders of hydrogen and battery electric pickups since June. Milton believes that this additional revenue has elevated investor’s anticipation towards the company, who commented “most analysts and investors are surprised in our production speed for the pickups”.

By all means, Milton did not announce the time and location for the mass production of Nikola’s pickups, though he remains extremely confident in the estimated production volume, who commented “the number after the channel initiation on June 29th will be astounding and making history”.

Looking at the arrangement of the production line, Nikola happens to be in the same schedule as competitors Tesla and Rivian, who has to achieve a driving distance of 600 miles and a more convenient energy replenishment method in order to surpass its competitors.

As one of the options for future energy, hydrogen fuel cells have been receiving significant attention in recent years, especially for long distance heavy trucks. After all, hydrogen fuel system is relatively light compared to batteries, and the recharging of hydrogen fuel is much faster than that of electricity. In addition to the abovementioned heavyweight working partners, Nikola is also working with South Korean solar panel manufacturer Hanwha and Norway based Nel, who will serve as essential roles on Nikola’s journey of conquering the hydrogen fuel cell field.

Concept of Nikola’s Hydrogen Refueling Station. SourceNikola

Similar to Tesla, Nikola also wishes to establish its own hydrogen refueling network to serve its own vehicles, and announced on June 3rd that the company will invest USD$30 million in buying equipment from Nel, which can produce 40,000 kg of hydrogen fuels on a daily bases in the future through water and renewable electricity. “These electrolyzers are able to power 5 large hydrogen refueling stations, and cover multiple states and transportation hubs of trucks”, commented Milton during his statement. Although he did not mention where the location for the first refueling station would be, one would guess California since the state offers an abundance of subsidy on alternative fuel vehicles.

The fuel cell technology, born in the 60s, is not considered as a new technology, though it had been profoundly expensive and lacking in endurance. Fortunately, this technology had been majorly improved from the past 10 years, and the prices for the materials and fuel boxes have been gradually stabilized. Simultaneously, the new hydrogen production method uses solar and wind energy, which is a greener approach in contrast to the previous industrial method (natural gas).

Despite the ambitious planning, Nikola is bound to enter a head on collision with automotive giants like Hyundai and Toyota in the future, where the former had initiated the first commercial hydrogen refueling station for automobiles in South Korea, and the latter has been testing hydrogen fuel trucks in the Port of Los Angeles for years.

 (Cover photo source: Nikola)

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