Phoenix, Arizona-based Nikola Corporation (NKLA) is asking stockholders to submit questions regarding a Proxy Statement the company filed in early April ahead of the annual stockholders meeting on June 5, 2024 when five proposals will come to a vote. Steven Shindler, Chairman of the Nikola Board, is particularly focused on Proposal 2, which advocates for a reverse stock split.
Not passing the proposal means Nikola could face Nasdaq delisting and unspecified limitations on securing capital.
A reverse stock split, essentially, consolidates the number of existing shares of corporate stock into fewer but more valuable shares. Shindler, as part of his efforts to rally stockholders to vote in favor of the upcoming proposal, released a video stating the reasoning behind the proposed split.
“We must eliminate the distraction of delisting and position ourselves to raise capital more efficiently and effectively,” he said.
Shindler is focusing on answering three key stockholder questions:
- What is a reverse split and how does it impact NKLA stockholders and the company?
- Why is a reverse split being proposed now?
- What are the advantages of a reverse split?
If Proposal 2 is approved and implemented, Nikola says the reverse stock split will “reduce the number of common shares outstanding and increases the dollar share value per share by the same ratio.” Furthermore, Nikola stock will be able to trade above $1.00. Hopefully, this action eliminates the delisting risk and keeps the door open for future capital.
Company investors are being encouraged to vote in favor of all five proposals, which also include nominees for the Board of Directors (Proposal 1). Stockholders - including those who no longer own shares - are already able to vote on the proposals. Their deadline is June 4. A Q1 earnings call is scheduled for May 7 where additional updates will be announced.
Nikola has faced numerous challenges since 2019 when founder and former CEO Trevor Milton was accused of making false and misleading statements about the company’s hydrogen and electric truck strategies in order to influence potential investors.
Milton had taken Nikola public through a Special Purpose Acquisition Company merger, more commonly referred to as a “SPAC,” instead of an IPO. Those statements and claims were made in order to attract “retail investors,” or non-professional investors who typically are not involved with IPOs.
Milton was charged with and found guilty of fraud in 2022. He was sentenced to four years in prison last December. Following Milton’s dramatic departure, Nikola scrapped its light-duty EV pickup truck plans to focus solely on Class 8 hydrogen fuel cell electric vehicles (FCEVs), battery-electric trucks, and the necessary charging infrastructure through the HYLA brand.
[Related: Nikola halts sales on battery-electric trucks due to recent fires, issues recall]
With the Trevor Milton era in the past, Nikola continues to look forward.
“We believe that if we can achieve a share price at a more consistent level with the Russell 3000 companies, it will encourage investor interest and improve the marketability of our common stock to an even broader range of investors,” Shindler said.
