Nikola’s Wild Week Erases 2023 Losses
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Nikola Corp. has finally reignited some of the fervor of its once die-hard day-trading fans..
The electric vehicle maker gained around 60% this week, with the bulk of the gains stemming from a July 13 announcement of a supply accord for a fleet of up to 50 EVs. The five-year pact was with a little known startup, hydrogen supplier BayoTech, but it was enough to reverse the stock’s 2023 decline, which led to a delisting warning in May and losses reaching 75% by early June.
A recent meme stock revival has sparked interest in EV names and helped push Nikola above $2 per share. But if investor interest again fades, there’s a danger the stock falls back below the $1 mark that sparked the Nasdaq Inc. notice. The stock is still down more than 90% from its pandemic peaks when the retail-trading crowd pushed shares to an intraday high of $93.99.
“For now, long buyers are behind the steering wheel,” said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.
The rally has burned short sellers, who have lost some $176 million in profits over the last 30 days, according to data from S3. Close to 70% of those losses came in the past week.
“If Nikola’s stock price continues to rise — expect the short squeeze to tighten, more short covering and the short side to have a greater effect on NKLA’s stock price in the future,” said Dusaniwsky.
It’s likely that retail traders were behind much of the recent run-up. Individual investors purchased $5.4 million worth of Nikola this week, with July 13’s $4.1 million haul marking the second-biggest flow in more than a year, according to data compiled by Vanda Research, which studies self-directed retail trades globally.
The outsized gains prompted investors to load up on both put and call options, positioning for either a downside price correction or added upside. This week, three-month implied volatility — a key measure of how expensive the options are — hovered close to a peak for 2023, as total open interest rose to an all-time high.
Wall Street is less bullish than Main Street. The company has six hold recommendations and only one buy, among analysts tracked by Bloomberg.
On July 12, before the company’s meteoric surge, Evercore ISI suspended its rating and price target for the EV maker, citing, among other reasons, an inability to judge timing of “significant capital raises” needed to fund operations into next year.
The analysts also pointed to the delisting risk and the complicated shareholder proceedings required to increase the number of authorized shares. There’s also a campaign led by the company’s former CEO, Trevor Milton, against the proposal.
The stock closed up 1.4% on July 14.
— With assistance from Bailey Lipschultz.
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