Nikola Shares Plunge Pre-Market on Founder Trevor Milton’s Resignation

Nikola Corporation’s shares slumped over 30% in pre-market trading on Monday after its founder Trevor Milton announced to voluntarily step aside as executive chairman and from the Board following allegations of fraud and nepotism.

The Board accepted his resignation, and Stephen Girsky, former Vice Chairman of General Motors Co. and a member of Nikola’s Board, has been appointed Chairman of the Board, effective immediately.

Short-seller Hindenburg Research said in a scathing report earlier this month that it had gathered enough evidence to show that Nikola and Milton made false claims about company’s proprietary technology to form partnerships with large automakers, Reuters reported.

The designer and manufacturer of zero-emission battery-electric and hydrogen-electric vehicles has rejected all the accusations and threatened to take legal action against Hindenburg.

“Nikola is truly in my blood and always will be, and the focus should be on the Company and its world-changing mission, not me,” said Milton, who owns about 20% of the stake in Nikola.

“So I made the difficult decision to approach the Board and volunteer to step aside as Executive Chairman. Founding Nikola and growing it into a company that will change transportation for the better and help protect our world’s climate has been an incredible honor.”

Nikola’s shares plunged more than 30% below $24 in pre-market trading on Monday; the stock is up over 300% so far this year.

Nikola stock forecast

Five analysts forecast the average price in 12 months at $55.75 with a high forecast of $79.00 and a low forecast of $45.00. The average price target represents a 63.06% increase from the last price of $34.19. All those five equity analysts, two rated “Buy”, three rated “Hold” and none rated “Sell”, according to Tipranks.

RBC raised their stock price forecast to $49 from $46 and Wedbush initiates coverage with neutral rating and $45 price target.

Other equity analysts also recently updated their stock outlook. Cowen issued an “outperform” rating and a $79 price target for the company. Royal Bank of Canada issued a “sector perform” rating and a $46 price target for the company. Deutsche Bank issued a “hold” rating and a $54.00 price target for the company. At Last, JP Morgan Chase & Co. raised Nikola from a “neutral” rating to an “overweight” rating and set a $45.00 price target.

Analyst views

“We believe that Nikola is well-positioned to address the growing need for low emissions and zero-emission vehicles in the Class 8 trucking market. The company’s focus on battery and hydrogen technology and use of strategic partners particularly for vehicle manufacturing should allow for a fairly smooth production ramp, in our view,” said Jeffrey Osborne, equity analyst at Cowen and Company.

“Longer term we see the company evolving into a more broad-based energy technology company as hydrogen fueling infrastructure is slowly built out,” Osborne added.

Upside and Downside Risks

Upside: 1) A faster ramp of production in Ulm, Germany at Iveco to achieve 1H21 production and Coolidge, AZ facility starts production faster in 2022. 2) Less dilution or debt needed due to finding a funding partner for hydrogen station rollout. 3) Faster gross margin profitability after the start of production. 4) Commercial launch of the Badger pickup through a partner, highlighted by analysts at Cowen.

Downside: 1) Ramp-up of production in Ulm, Germany is not successful. 2) Greater dilution is needed for funding needs of stations and lower output from Germany and Arizona. 3) Elongated period of negative gross margins in production. #StockMarket##StocksDrop#

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