Nikola (NASDAQ: NKLA) stock price has collapsed as concerns about the company’s dilution continues. The shares crashed below $1 on Thursday, meaning it has fallen by almost 100% from its peak of $90.
Bankruptcy risks remainNikola Motors share price has been in a freefall for a long time. This downtrend happened for three main reasons. First, investors are concerned about the future of hydrogen trucks. While hydrogen is a good and clean energy source, the reality is that the current infrastructure cannot support vehicles.
A recent study found that the hydrogen industry infrastructure faces a $460 billion gap. This infrastructure is spread across key parts like transport, production, ports, and compression equipment. Therefore, many big buyers of trucks are concerned about the new trend. More so, these trucks are much expensive than the current diesel ones.
Second, Nikola has been a dilution machine. The company recently used Delaware’s corporate law to increase the number of authorised shares to 1.5 billion. The company then quickly went to the market and raised $165 million. This dilution led to the total outstanding shares to 985 million, a 20% in the past few months.
Nikola investors should prepare for more dilution in the coming months since the EV industry consumes a lot of money. We have seen well-capitalised companies like lucid Motors and Nikola burn billions of dollars in the past two years.
These companies have started shipping their vehicles while Nikola is yet to start delivering its fuel cell trucks. And its electric vehicle trucks are not doing well either since it recently decided to recall them.
Finally, Nikola stock price has crashed because of the ongoing EV crash. Tesla, the biggest automobile company in the world, has reported decelerating sales. Other EV stocks like Nio, Xpeng, Mullen Automotive, and Fisker have all crashed.
I believe that Nikola faces genuine bankruptcy risks in this high-interest rate environment. For one, the company is losing more than $230 million per quarter while the value of its equity is falling.
Nikola stock price forecast
The daily chart shows that the NKLA share price has been in a strong freefall for a long time. It reached a low of $0.52 in June and then bounced back to almost $4. Now, the stock has moved slightly below the psychological level at $1.0.
Nikola remains below the 50-day and 100-day moving averages. It is also approaching the key support at $0.8155, the lowest swing in September. Therefore, the shares will likely continue crashing as sellers target the year-to-date low of $0.5262. This view is in line with my previous Nikola outlook.
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