Fuel Cell Startup Nikola Nears Public Trading Debut

Nikola Corp., the startup maker of Class 8 trucks electrically powered by batteries and fuels, expects its shares to trade under its own name on the NASDAQ later this week following a vote to merge with the "blank check company" that raised hundreds of millions of dollars for its public launch.

VectoIQ VTIQ and Nikola shareholders scheduled what is expected to be a drama-free execution of the merger Tuesday morning. VectoIQ shares would begin trading under the ticker NKLA on Thursday.

Eschewing a traditional initial public offering, Nikola agreed March 3 to merge with VectoIQ, a special-purpose acquisition company (SPAC) that raised more than $700 million from investors, money that Nikola will get to continue toward truck production.

In addition to pledging its own $230 million, VectoIQ raised $525 million from mutual funds and other investors through a private investment in public equity (PIPE) that allowed buyers to purchase shares in the SPAC for $10 each.

In anticipation of the merger, VTIQ shares have more than tripled since trading at $10.50 on March 18 to close Monday at $33.99. 

Going public presents additional challenges for a startup.

"It's going to be a lot of work," CEO Trevor Milton told FreightWaves. "We've had to hire a huge team to manage all that. But I think that it actually makes it easier for us because we no longer have to deal with all the people saying it's total vaporware fraud."

$1 Billion In Cash

As part of its Series D fundraising in September 2019, Nikola received $100 million in cash and $150 million in in-kind engineering and production services from CNH Industrial. It also created a joint venture with CNHI CNHI subsidiary IVECO S.p.A.

"With all the money we have on hand, plus the warrants that'll be exercised, you're talking about over $1 billion in cash in our account upfront with no debt, and a business model that's incredibly profitable," Milton said.

Nikola received $4.1 million under the federal Paycheck Protection Program to deal with the economic fallout of the coronavirus pandemic. But it returned the money after the U.S. Securities and Exchange Commission cleared its merger in May.

Nikola plans to begin battery-electric truck production at an IVECO plant in Ulm, Germany, in 2021 followed by the production of hydrogen-powered fuel electric trucks at a new plant in Coolidge, Arizona, about 50 miles south of Phoenix, in 2023.

"We actually have the very first semi-truck in the world to be in mass production with zero emissions that's made to drive more than 300 miles, not just a rinky-dink little trial truck," Milton said.

More Than Money

Nikola's tie-up with VectoIQ came with more than cash. VectoIQ CEO Steve Girsky, who has joined Nikola's board, has decades of experience as an automotive analyst, adviser and executive.

"The great thing about Steve Girsky is I can call him and say, ‘Hey, who's the best paint factory guys? Who's the best automation guy for factory equipment?' Five seconds with him is like a digital encyclopedia," Milton said.

Girsky's contacts expedite answers.

"Even if you're a big company like Nikola where people want to work with you, it still takes three weeks to get in front of the right people," Milton said. "In a day or two, you're in front of the CEO of all these companies that [Girsky] has a 30-year history with or 20-year history with, and they know that we're legitimate. Having him on our board has been really helpful."

Early Milestones

Nikola's first objectives, Milton said, are getting the Ulm joint venture producing battery-electric trucks next year while building the first two hydrogen stations located along U.S. routes that Anheuser-Busch trucks will cover. The beverage maker has committed to lease up to 800 Nikola fuel cell trucks.

"The idea is to hit these first milestones, reduce the risk across the board, and prove the business model completely functional. Then capital becomes limitless," Milton said. "We can literally go out and get $5 billion or $10 billion if we wanted."

Nikola has 14,602 orders with a book value of nearly $10.3 billion, according to a company document filed at the time of the merger announcement.

"I think we'll become the most valuable brand of a trucking company in the world in just a few short years, and the people sense that," Milton said. "Investors look at everything. They look at your business model, they look at your plan, and they look at the leadership."

Separately, Nikola said last Friday it is terminating an exclusive sales, service, and maintenance agreement with Ryder System Inc R that was signed in 2016. The two companies may work together in the future, 

"We know that the capital needs to support Nikola will soon be incredibly high," Milton said. "Multiple partners enable us to spread the capital needs across many companies and helps to reduce risk."

Bundled Services

Nikola's go-to-market plan is to bundle a seven-year, 700,000-mile lease that includes a truck, fuel, and maintenance for a cost of about 95 cents a mile. Nikola claims the rate compares favorably to diesel at 97 cents per mile subject to changes in emission regulations.

Neither battery-electric nor fuel cells have tailpipe emissions, other than water vapor for fuel cells.

Investors appear impressed by the vertical integration, which Milton said generates nearly $1 million in revenue per truck.

"No one else in the industry comes close to that," he said. "So, I think that is why you see so many people rallying behind the stock and why it has so much of a bright future ahead of it,"

Nikola's emission-free trucks and plans for hundreds of hydrogen fueling stations fit the model of investors looking for companies practicing sound environmental, social, and governance (ESG) principles.

"Nikola is one of the only great ESG investment-compatible companies in the world, in my opinion," Milton said. "It is 100% dedicated specifically to what ESG was established for, and it's going to make a greater impact on environmental emission reductions than almost any other company in the world."

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