Nikola’s $34 billion valuation neglects outlook for no revenue

It has some competition, but no stock on the auto sector is a better reflection of the equity market’s exuberance than Nikola Corp.

The aspiring battery-electric and hydrogen fuel-cell truck maker debuted on the Nasdaq last week following a reverse merger and its stock quickly took off, doubling on Monday and rising another 28% shortly after Tuesday’s open. Trading was halted twice within the first 40 minutes due to volatility, with the shares plunging as much as 22%. They were back up 9% as of 11 a.m. in New York.

The $34 billion market capitalization Nikola had at the intraday peak belies the company’s fundamentals. Nikola is forecasting zero revenue for 2020 and its first $1 billion year in 2023. It doesn’t expect to be fully utilizing an Arizona assembly plant that it hasn’t built yet until 2028.

And yet Ford Motor Co., which is expected to report about $115 billion of revenue for this year, trailed Nikola by market cap at several points Tuesday. Many skeptics have questioned for years how much electric-car maker Tesla Inc. ought to be worth. But with Nikola, investors have taken appraisals of zero-emission vehicle manufacturers named after a celebrated Serbian-American inventor into the stratosphere.

“Nikola’s No. 1 goal is stable growth over time,” Trevor Milton, Nikola’s executive chairman, said in an emailed statement. The 38-year-old said several factors may have spurred Monday’s gain and cited examples including his tweeted announcement that the company will start taking reservations for its Badger pickup.

Starting five years ago, when Milton founded Nikola, through the end of last year, the Phoenix-based company has lost about $188.5 million. It’s planning to start delivering the Tre battery-electric semi truck next year, followed by two fuel cell-electric models in 2023.

The Badger model that Milton said may have gotten the market excited on Monday might not actually make it into production. In Nikola’s public-offering filing, the company said it is focused on making Class 8 heavy-duty vehicles and doesn’t expect to build the Badger unless it finds an established manufacturer to partner with.

A spokesperson for the company said Nikola will announce a partner in the near future, without giving more specifics.

Last week, Milton ceded the chief executive officer job to Mark Russell, a former COO of metals manufacturer Worthington Industries Inc. who has been president of Nikola since February 2019. VectoIQ Acquisition Corp., the blank-check company Nikola merged with, is led by Steve Girsky, a former General Motors Co. vice chairman who helped lead the carmaker out of bankruptcy.

Little Cash

Nikola had about $86 million in cash at the end of last year. Prior to the stock listing, it had raised more than $500 million of private capital, though that includes a $150 million in-kind contribution from CNH Industrial NV, the truck maker linked to Italy’s billionaire Agnelli family. CNH also invested $100 million cash in Nikola last year.

The partnership with CNH includes a 50-50 venture in Europe that aims to start producing battery-electric trucks in Germany in the first half of next year and a North American alliance that Nikola will fully own.

Nikola is planning to build a 1-million-square-foot facility south of Phoenix and start making trucks in 2021. It’s expecting to reach full production of about 30,000 fuel cell-electric vehicles in 2027 and 15,000 battery-electric vehicles the following year.

Although Nikola touts reservations for 14,000 fuel cell-electric trucks that it says are worth about $10 billion of sales, those are far from done deals. The company told prospective investors in April that it was negotiating with strategic fleet partners to convert pre-orders into binding contracts with deposits.

While times are good for Milton—his fortune stood at $9 billion as of Monday’s close, according to the Bloomberg Billionaires Index—he still covets something Tesla’s CEO Elon Musk has: a blue check mark on Twitter.

Then again, Milton may want to be careful about seeking notoriety on Musk’s favorite social-media platform. The account @TESLACharts, which has accumulated roughly 26,400 followers by incessantly trolling Musk, has taken notice of Nikola’s rise.