While everyone’s talking about AI stocks and Nvidia (NASDAQ:NVDA), Nikola (NASDAQ:NKLA) is trending on the day too. However, it’s not for reasons that investors would like. That’s as NKLA stock is down more than 20% so far on Thursday.
The move sent shares down to a new low at 58 cents a share. Driving today’s losses are reports that the company received a delisting notice from the Nasdaq as NKLA stock has not maintained minimum price requirements.
When a company is in this scenario, firms will often resort to reverse stock splits to satisfy exchange requirements. In fact, Lordstown Motors (NASDAQ:RIDE) recently underwent a 1-for-15 reverse stock split for the same reason. Shareholders shouldn’t be surprised if Nikola’s management goes this route too.
Eventually, the company will need to do something. As reported:
“Nikola has been trying to raise cash for operations by selling equity, like other electric vehicle (EV) firms, in a turbulent market, and on Wednesday urged shareholders to vote in favor of increasing the number of shares at its annual shareholder meeting next month.”
NKLA Stock Continues to Struggle
It’s been a rough run for NKLA stock as it’s working on its third straight weekly decline. So far, shares are down about 43% in that span. The stock is also nearing its fourth straight monthly decline, down about 80% in that span.
The situation is dire, with shares down more than 90% over the past 12 months and 99% from an all-time high. On the plus side, Nikola is finally generating revenue. However, it’s hardly been robust.
When the firm reported earnings earlier this month, the company’s loss per share was in-line with expectations, while revenue came in at just $11.12 million and missed consensus estimates. Nikola — and more broadly speaking, upstart EV stocks — need to find a way to scale production without being overburdened with costs. Particularly in the current economic and investing environment we’re in now.
The unfortunate reality is that the auto industry is incredibly expensive. There are massive overhead costs associated with R&D, production and sales, among other segments. For Nikola, a wave of controversy over the years didn’t help.
We’ll see what the company’s next steps are from here, but the situation is not good.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
