Nikola turns to Delaware law to help finance hydrogen pivot

Struggling hydrogen truck manufacturer Nikola Corp. seems to have a found a way to issue new shares to raise badly needed capital — wait.

The Phoenix commercial fuel cell and electric truck maker has tried twice to get shareholders to approve issuing new stock only to fail to reach the required majority of all shareholders to move forward.

Its new strategy is to wait until a change in Delaware corporate regulations takes place Aug. 1 that requires only a majority of shareholders voting on the issue, something Nikola believes it has.

Nikola's proposal to double its outstanding shares to 1.6 billion from 800 million is critical to its pivot to producing hydrogen fuel cell trucks and building out HYLA, its hydrogen production and distribution network.

Nikola, which reported losing upward of $150 million per quarter in first-quarter earnings, wants to raise at least $100 million through the issuance of additional stock. Company executives said it could also raise $500 million going forward through existing credit and loan agreements. It could also borrow against its buildings and other assets to raise funds.

Success would cap a series of positive developments that have helped bolster Nikola stock over the past month.

The company faced delisting from Nasdaq because its stock was trading below $1. But the share price has recovered to close at $1.38 as of Wednesday, and the exchange has withdrawn its delisting warning.

Nikola's shares have risen 155 percent since closing at 54 cents June 6.

The company also is working to trim expenses, disclosing in June that it was cutting 270 jobs, roughly 23 percent of its work force. The work force reduction will save $50 million annually.

In other moves to streamline the business, Nikola said it would focus on the North American marketplace and sell its European joint venture share to partner Iveco Group.

It plans to launch its Class 8 hydrogen fuel cell electric truck next quarter and said it has logged 178 sales orders from 14 customers. Nikola said earlier this month that it had delivered 111 battery-electric trucks but will now get out of that business to concentrate on fuel cell trucks and the hydrogen distribution business.

Nikola also announced it secured a $41.9 million California Transportation Commission grant to build six heavy-duty hydrogen refueling stations in Southern California for HYLA.

Although Nikola is starting to inch forward it still faces significant challenges including raising enough capital to sustain the business until it can generate far more revenue and competition from established truck manufacturers that have multiple zero-emission electric trucks in production and are pushing into fuel cell vehicles.

"The whole problem here is it's a new company in the field and they don't have all the equipment like the established players like Daimler, Volvo or Paccar have," said Antti Lindstrom, a truck analyst at S&P Global Mobility. "They need a lot of money to be able to get into production of this kind of new technology."

Nikola's competitors have decades of research and development in fuel cells and strategic partnerships with each other, Lindstrom said.

Cellcentric, a joint venture of Volvo Group and Daimler Truck developing hydrogen fuel cell technology, demonstrates the challenge, Lindstrom said.

Volvo and Daimler have a combined $71 billion market capitalization, providing the financial strength to fund the research and bring products to market. That compares to Nikola's $1 billion market capitalization and roughly $130 million in cash and equivalents at the end of the first quarter.

Volvo and Daimler "are sharing the costs between two major OEMs that are essentially competitors to each other. That also is an indication of how expensive this whole thing is to get into," Lindstrom said.

More established players also have the benefit of brand recognition and trust among companies and fleets that purchase or lease their trucks, Lindstrom said.