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Nikola (NKLA) seeking shareholder approval to sell additional stock in effort to sustain operations

Jul 28, 2023

Nikola is seeking shareholder approval to increase the amount of new stock it can sell on Nasdaq in a move that it says will sustain business operations.

The Phoenix-based electric truck company is asking shareholders to vote on a proposal to increase its authorized common stock from 800 million to 1.6 billion shares.

"Without an increase in the number of authorized shares of common stock, the company will be constrained in its ability to raise capital in order to support our ongoing operations and business objectives, and may have to curtail activities or lose important business opportunities — including to competitors — which could adversely affect our financial performance and growth," the company wrote in its 2023 proxy statement.

Nikola (Nasdaq: NKLA) had 693.3 million shares of issued and outstanding stock as of April 18, according to the proxy statement.

For Nikola's proposal to pass, it needs to gain approval from investors holding more than 50% of its outstanding shares by June 6 at 11:59 p.m. Eastern Standard Time, ahead of its annual shareholder meeting slated for June 7.

As of June 5, Nikola's proposal received positive voting support, but the company noted challenges with obtaining approval "due to the significant number of stockholders, including a large number of individual retail accounts, and international accounts," according to a company release.

Nikola said it will adjourn its annual meeting, if necessary, to allow more time to vote on all proposals, stating that it faced a similar challenge at its annual meeting last year, resulting in several adjournments to obtain voter approval for its proposals.

Nikola said in its proxy statement that issuance of additional shares of common stock will decrease equity ownership of its existing stockholders and could dilute voting power. It could also potentially dilute future earnings per share of common stock, depending upon the price at which additional shares are issued by the company.

In a shareholder meeting on June 1, Nikola CEO Michael Lohscheller touted progress of the company's Tre hydrogen fuel cell trucks with final validation underway and plans to make the electric vehicles available for purchase later this year.

The company received more than 178 orders for the hydrogen fuel cell trucks, along with letters of intent for truck orders from Anheuser Busch, PGT Trucking, Plug Power, Total Transportation Services and Covenant, Lohscheller said.

"The fuel cell truck momentum is very promising, and the strong interest reaffirms our belief that we have the right product at the right time," he said at the shareholder meeting. "By continuing to build sales momentum on the hydrogen fuel cell truck, and realigning cost structures, there is potential for us to reach positive gross margin and EBITDA on lower volumes than we previously communicated."

Nikola will continue to focus on its hydrogen fuel cell trucks, HYLA hydrogen refueling business, and operations in the North American market in an effort to streamline operations and reduce cash burn now that it sold its stake in a European joint venture with Iveco Group in Ulm, Germany.

Last month, Nikola inked a development agreement with Voltera Power, which will supply funding for up to 50 HYLA hydrogen fueling stations over the next five years, in addition to entering agreements with Chart Industries and Taylor Wharton to supply equipment to produce, transport and dispense hydrogen via mobile fuelers and modular stations, Lohscheller said.

The company is localizing its supply chain at its Coolidge manufacturing facility, where it's modifying the assembly line to accommodate both hydrogen fuel-cell and battery electric trucks, which it will be shifting to a build-to-order product.

"So, with our new focus, optimized and aligned cost structures, and working capital optimization, we have a better line of sight to achieve EBITDA profitability in 2025, and positive gross margin next year," Lohscheller said. "This, of course, assumes we have sufficient common stock available to finance our business."

Nikola's shareholder vote request comes as the company received a delisting notice on May 25 from Nasdaq stating it's not in compliance with a $1 minimum bid price requirement.

Nikola has 180 days — or until Nov. 20 — to regain compliance, meaning shares have to trade above $1 for 10 consecutive days. If Nikola is unable to regain compliance, it may consider a reverse stock split, upon shareholder approval, to push the share price above $1, Lohscheller said.

"We believe we will be able to regain Nasdaq compliance and will work to ensure Nikola common stock is not delisted," he said.

Nikola's stock closed at 55 cents a share on Monday, down 5% from the previous trading day. Track the stock here.

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