Nikola Corporation (NASDAQ: NKLA), an electric truck maker, may undergo a reverse stock split if its stock fails to meet Nasdaq’s minimum bid price requirements within a specific timeframe, announced CEO Michael Lohscheller on Thursday.
NKLA stock closed at approximately 59 cents on Friday. The company is currently grappling with significant losses, high cash burn, and sluggish demand for its battery-powered trucks. Last week, Nikola received a delisting notice from the stock exchange.
Nasdaq mandates that shares must trade above $1, and a notice is sent if the price falls below that threshold for 30 consecutive business days. Companies then have a 180-day period to ensure the stock trades above $1 for at least 10 consecutive days to comply with the rules. If the requirements are not met, an additional 180-day period may be granted under certain conditions.
According to Lohscheller, if Nikola Corporation (NKLA) fails to meet the requirements within the specified periods, they have the option to implement a reverse stock split. This means that they can consolidate their shares into a smaller number. This decision would be subject to a vote by the shareholders and aims to increase the value of each share above the $1 threshold.
During a webcast addressing shareholder inquiries, Lohscheller expressed confidence in regaining Nasdaq compliance. He also emphasized the company’s determination to prevent delisting. In addition, Lohscheller acknowledged the challenging times ahead and the need to make difficult decisions as the company navigates its current circumstances.
Following the webcast, Nikola’s stock experienced a 1% increase in after-market trading.
Investor concerns have primarily revolved around Nikola’s cash reserves, as well as those of other electric vehicle manufacturers. There are apprehensions that declining sales could prompt companies to pursue additional share sales to raise funds. In the first quarter, Nikola reported a cash burn of $240 million, compared to $200 million per quarter in 2022.
On Thursday, Lohscheller urged the shareholders to vote in favor of allowing the company to issue more shares during the upcoming annual meeting next week.
Earlier, the truck maker stated that “without these additional shares, Nikola’s ability to continue its ongoing operations and objectives, including Nikola’s need for capital, will be out of reach.”
Nikola also announced last month that it would halt production temporarily to focus on hydrogen fuel cell trucks. In addition, the company plans to proceed with building battery electric trucks only upon receiving orders.
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