Shares of Nikola (NASDAQ:NKLA) have fallen by about 75% since Aug. 3, completely erasing the stock’s 145% gain between July 12 and Aug. 3. NKLA stock is also below $1, which means that it is in noncompliance with Nasdaq’s minimum price requirement of $1.
Last month, Nikola announced that it would recall every single battery-powered electric truck it has ever sold due to coolant leak risks that could cause a fire. The company also decided to suspend all sales. After an internal investigation, Nikola concluded that a single supplier component in the battery pack was likely attributed to the leak. As of mid-August, there had been 209 battery-powered electric trucks held by dealers and customers.
“The recall said the trucks were safe to drive as long as the main battery disconnect switch was in the ‘on’ position allowing Nikola to monitor the trucks remotely,” said FreightWaves.
Nikola’s fire drama first started in June when five semi-trucks caught fire at its headquarters in Phoenix. Nikola had initially suspected foul play but has since retracted this thesis.
NKLA Stock Plunges on Fire Risks
As of Aug. 15, there were 157.70 million shares of NKLA sold short, up by 13.9% compared to the reading on July 31. That’s equivalent to a short interest as a percentage of float of 22.87%. Generally, a short interest above 10% is viewed as high, while a short interest above 20% is viewed as very high.
However, recent events surrounding the company have lowered the chances of a short squeeze. Last Friday, Nikola disclosed that one of its trucks had caught fire while the company was testing for the source of the fires. A few days before, another Nikola truck had caught fire at a customer facility.
According to Electrek, Nikola has now experienced four fire incidents in four months among eight trucks. These incidents could possibly be linked to battery supplier Romeo Power, which Nikola acquired last year. Electrek reported that a company insider stated that Romeo engineering executives had recommended to cease production of the Hermes modules. Still, the CEO at the time decided to continue producing the module and believed that the issue could be fixed while production was ongoing.
On the date of publication, Eddie Pan did not hold (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.
