Nikola’s Stock Is Slumping. Its Board Made a Grim Decision.

Nikola’s Stock Is Slumping. Its Board Made a Grim Decision.

Shares of the electric truck maker Nicholas (NASDAQ:NKLA) were trading sharply lower Thursday morning, after the company announced in a regulatory filing that it would conduct a 1-for-30 reverse stock split next week.

As of 10:30 a.m. ET, shares of Nikola were down about 23.3% from Wednesday’s closing price.

Nikola’s Stock Is Slumping. Its Board Made a Grim Decision.

Electric truck maker Nikola is planning a 1-for-30 reverse stock split next week. Image source: Nikola.

Nikola’s reverse stock split will be more dramatic than expected

The upcoming reverse stock split isn’t much of a surprise to shareholders, but one key detail is new. At Nikola’s annual meeting on June 5, shareholders approved a proposal authorizing Nikola to carry out a reverse stock split at a ratio between 1:10 and 1:30.

The decision to proceed with a 1:30 split, the most aggressive allowed under the adopted proposal, was made by Nikola’s board last week and revealed in a Securities and Exchange Commission report ( DRY). deposit Thursday morning.

The split will be effective immediately after the close of the American markets on June 24, next Monday.

Why Nikola’s reverse stock split is not a good sign

Reverse reverse stock split are generally not optimistic. They typically occur when a company’s stock price falls below $1 for an extended period of time. Nikola’s stock hasn’t closed at $1 or higher since April 9.

Nasdaq requires publicly traded companies to maintain a minimum trading price of $1. If a company’s stock price falls below $1 for 30 consecutive trading days, the exchange sends the company a formal notice informing it that it has 180 calendar days to recover. compliance. If this is not the case, it may be deregistered.

There are two obvious ways for a company to get back into compliance: announce news that raises the stock price or do a reverse consolidation.

Nikola’s decision to do a reverse split, and specifically a 1-for-30 reverse split rather than a 1-for-10 split (or something in between), suggests that the board does not see the The truck maker’s stock prices soar. his soon.

Added to this is a certain nervousness among investors following the start of electric vehicles. FiskerNikola’s bankruptcy filing earlier this week is likely why Nikola shares are down sharply today.

Should you invest $1,000 in Nikola right now?

Before buying Nikola stock, consider this:

THE Motley Fool Stock Advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now…and Nikola wasn’t one of them. The 10 selected stocks could produce monster returns in the years to come.

Consider when Nvidia made this list on April 15, 2005…if you had invested $1,000 at the time of our recommendation, you would have $830,777!*

Equity Advisor provides investors with an easy-to-follow plan for success, including portfolio building advice, regular analyst updates, and two new stock picks each month. THE Equity Advisor the service has more than quadrupled the return of the S&P 500 since 2002*.

See the 10 values ​​»

*Stock Advisor returns June 10, 2024

John Rosevear has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.

Nikola’s shares are collapsing. Its board of directors made a grim decision. was originally published by The Motley Fool

Source Reference

Latest stories