Why Nikola Stock Is Getting Crushed This Week

Original Article:

Source: Link

Nikola (NASDAQ: NKLA) has been working to grow a customer base for its hydrogen-fueled electric trucks. The company, in fact, announced a large order for the electric vehicles (EVs) last month. But investors haven't been impressed and Nikola stock has struggled. That has led to a dwindling stock price and now a decision to perform a reverse stock split. The details for a reverse stock split were provided this week, but investors already knew one was coming. Yet the reaction was for Nikola shares to tumble over 30% as of Thursday afternoon trading, according to data provided by S&P Global Market Intelligence. That's because one detail from the announcement didn't provide any new confidence among investors. Stock splits aren't always positive In early June Nikola shareholders approved a reverse stock split with a ratio of between 1-for-10 and 1-for-30. The board approved the maximum ratio it was allowed, and the 1-for-30 reverse split will be effective for the start of trading on Tuesday, June 25. Investors reacted negatively because it signals that Nikola's board doesn't have a large amount of confidence that the underlying business can help raise the stock price. The ultimate reason for the split was to get in compliance to remain listed on the Nasdaq Stock Market. Stocks can't trade below the $1 per share level for an extended period of time before being delisted. Just last month Nikola announced an order for 100 of its hydrogen fuel cell trucks to be used for drayage operations at California ports. That's a use case the company feels will be a good fit for the trucks. Nikola has already set up hydrogen fueling station infrastructure in Southern California to support that use case. But hydrogen infrastructure will be costly. Even with the new order announcement, it seems the board of directors still wanted a cushion for the share price to remain listed over the long term on the Nasdaq exchange. That's not making investors confident either. Should you invest $1,000 in Nikola right now? Before you buy stock in Nikola, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nikola wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $830,777!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Story continues See the 10 stocks » *Stock Advisor returns as of June 10, 2024 Howard Smith has positions in Nikola. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy. Why Nikola Stock Is Getting Crushed This Week was originally published by The Motley Fool