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Wall Street does not expect Nikola to be free cash flow positive until 2027.
Krisztian Bocsi/Bloomberg
Nicholas
announced on Wednesday that it was adjourning its annual meeting of shareholders and would reconvene it in July.
The company will take the next few weeks to muster more shareholder support for a key proposal that will
Nicholas
(ticker: NKLA) to issue more shares, a necessary prerequisite for raising more capital.
“Without additional actions, our ability to raise the capital we need to pursue our mission will be out of reach,” CEO Michael Lohscheller said in a video to shareholders in May. “Not voting on Proposition 2 is the same as voting against the proposition.”
Nikola will eventually need more capital to expand his business. Nikola ended the first quarter with approximately $200 million in cash on its books and access to approximately $800 million in capital, including its cash balances. Wall Street expects the company to use about $150 million per quarter and does not expect positive free cash flow until 2027.
Certainly, shareholders seem to see the wisdom in approving Proposition 2. Nikola says a majority of the 77% of shares voted so far are in favor of it. But not all of the yes votes in the 77% represent 50% of the total shares outstanding. Nikola must therefore solicit the remaining 23%, pushing for the yes.
The uncertainty around Proposition 2 adds some uncertainty for Nikola investors, but its impact on the company, in the long run, should be small. The actual number of shares a company owns is usually just an accounting placeholder. Hitting a ceiling is unusual. The stock issues should resolve themselves over time, although there are no guarantees, but Nikola investors have other areas of concern.
Through Wednesday, shares are down about 91% in the past 12 months. Rising interest rates and shrinking cash balances have dampened investor enthusiasm for the stocks of many start-ups.
Shares of Nikola had a great day on Wednesday, rising 9.5%. It is, however, only a nickel. The shares are trading at 59 cents and the value created on Wednesday is around $19 million.
Investors could face short-term volatility as the company resolves the Proposition 2 issue in the coming weeks.
Write to Al Root at allen.root@dowjones.com