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Nikola Corp, the New Kid in the Block with Zero Revenue Valued at $22.71 Billion

  • June 17, 2020 09:13 PM AEST
  • Hina Chowdhary
    Director, Equities Research Hina Chowdhary
    1416 Posts

    Hina Chowdhary is the Director, Equity Research at Kalkine and has an extensive experience of about 15 years in the area of Research, which includes 5+ years in Equities Research particularly.She has earned a Master of Science degree from the renowne...

Nikola Corp, the New Kid in the Block with Zero Revenue Valued at $22.71 Billion

Summary

  • Nikola Corporation made its debut on NASDAQ earlier this month via a reverse merger, skipping lengthy IPO process.
  • It is constructing hydrogen fuelling stations across North America and seeks to deliver long-range trucking vehicles with similar emission levels like electric vehicles.
  • Nikola has raised $700 million through reverse merger and private investment in public equity (PIPE).
Gold MTF non-AMP

Nikola Corporation (NASDAQ:NKLA)

Earlier in June, Nikola Corporation was listed in the market through a reverse merger. It raised $700 million from institutional investors through business combination and PIPE. Nikola completed the business combination with VectoIQ Acquisition Corporation, which was a special purpose acquisition company.

The transaction was approved by VectoIQ shareholders. It would use the proceeds to ramp up vehicle manufacturing, break-ground at Coolidge, Arizona for its manufacturing facility, and continue roll-out of hydrogen station infrastructure.

NKLA is also engaged in renewable energy powered infrastructure systems, just like Tesla. It is a designer and manufacturer of hydrogen-electric and battery-electric vehicle, components, electric vehicle drivetrains, hydrogen fuelling infrastructure, and energy storage systems.

It was said that listing of the business is a successful endorsement of its fuel-cell technology and battery-electric technology. Nikola’s launch of the first fuel-cell semi-truck was defining moment for the business that had drawn the attention of the world towards hydrogen.

The company’s joint venture with IVECO, an Italian vehicle manufacturer, has a pre order sales book value of $10 billion. It expects to report initial revenues by 2021 when Nikola Tre Class 8 BEV is set to hit the roads. Nikola Two Class 8 FCEV would be rolled out in 2023. Vehicles would be refilled at its owned-hydrogen fuelling stations.

In June, Nikola has also secured supply of electrolysis equipment. It agreed with Nel ASA for the procurement of 85-megawatt electrolyzers, which are critical to supply hydrogen at its five 8 ton/day fuelling stations. Collectively, the purchases could deliver over 40,000 kgs of hydrogen/day.

The purchase orders from Nel ASA are worth over $30 million that would be delivered from a new manufacturing plant currently in development in Norway. Further orders are expected to finalise over the coming months for remaining equipment.

It was said that the company is building largest hydrogen network in the world, and the five stations would cover multiple states and trucking routes. Since 2017, Nikola and Nel have been working together for construction of massive hydrogen infrastructure. Nel ASA is setting up a factory, which would have a dedicated capacity for Nikola.

The company has recently appointed two industry veterans. Its hydrogen fuelling and battery charging business will be led by Pablo Koziner, who had been at Caterpillar Inc. for over 18 years working across energy and distribution services.

Global manufacturing would be headed by Mark Duchesne, who had worked five years at Tesla and 22 years at Toyota. He would augment the manufacturing capabilities, including planning, development, operating facilities.

At this juncture, the company is moving to accelerate production of Class 8 Nikola Tre BEV in Germany at the JV plant with IVECO and breaking ground at Coolidge, Arizona for the manufacturing facility.

Hydrogen proposition of Nikola

As per Nikola, Hydrogen eliminates the legacy issues, including long recharge times, cold start, additional weight, limited range etc., while it provides similar benefits of EVs, including instant torque, zero-emission, more horsepower etc.

Hydrogen Chain (Source: Nikola Website)

Nikola, along with industry consortium, is developing fast fuelling hydrogen infrastructure that would take 15 minutes to refill. It is estimating a range of 500-750 miles between fill-ups, meaning twice of the electric vehicles with comparable battery and similar to diesel.

Further, hydrogen offers weight advantage over the comparable electric vehicles as long range truck batteries are heavy and don’t start at low temperatures.

Nikola Products

Trucks

Source: Nikola Website

Powersports

Source: Nikola Website

Nikola shares have soared after reverse merger led listing

Since the combined shares started trading on 4 June 2020, NKLA shares closed at $79.73 on 9 June 2020 after closing at $33.75 on 4 June 2020. Of late, shares of the company are tracking lower from the 9 June close. On 16 June 2020, NKLA closed at $62.93 with a market capitalisation of $22.71 billion. Interestingly, Nikola’s market cap is very close to that of erstwhile Ford Motor Company ($26 billion) and GM ($39 billion) both with revenue over $100 billion. Investors are going liberal as far as valuation of new age auto businesses is concerned. Only time will tell if these companies would meet investor enthusiasm.

Governments Doling out Subsidies

In Europe, the Governments have announced major subsidies for EV consumers. Netherlands would be providing €4k deduction on an EV purchase. Germany would be providing €6k subsidy and €3k manufacturing incentive. France would be giving a subsidy of €7k and scrapping an old diesel vehicle would bring additional €5k.

With policymakers introducing EV subsidies, it appears appropriate for the companies to set up manufacturing plants in Europe. Subsidies will likely accelerate the take-up of the lower emission vehicles by the consumers.

Meanwhile, Nikola is moving to accelerate production in Germany, and Tesla expects to deliver Model Y from a German plant in 2021.

(All currencies in USD unless or otherwise stated)

 

 


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