Hydrogen truckmaker Nikola rolling downhill toward bankruptcy?

It looks like it is further going downhill with American hydrogen truckmaker Nicola, following a The Wall Street Journal and Bloomberg report that the company is considering Chapter 11 to propose a plan of reorganization to keep its business alive and pay creditors over time.

Last week, Nicola (NASDAQ: NKLA) shares tumbled as much as 45% to 41 cents before markets opened in New York on Friday. A Nikola spokesperson told Bloomberg the company was “evaluating a variety of options, including financing, as part of a financial restructuring.”

Probability of bankruptcy 85%

The plans aren’t final and could change, but analysts like online investment management service Macroaxis estimate that Nikola Corp’s probability of going bankrupt is currently 85%.

Reports on Nikola’s fragile health have been constants in the history of the young start-up company that uses Nikola Tesla’s first name to develop class 8 heavy trucks running on hydrogen or batteries.

End of December 2024, the company confirmed another round of layoffs while warning in filings with the US Securities and Exchange Commission (SEC) that it does not have enough cash to sustain operations through the first quarter of 2025.

In the SEC filing, Nikola stated, “We currently estimate that our existing financial resources are only adequate to fund our forecasted operating costs and meet our obligations into, but not through, the first quarter of 2025.”

Once valued more than Ford

Once valued at $34 billion, more than Ford, Nikola’s market capitalization has plummeted to around $100 million. The company is hemorrhaging approximately $200 million each quarter—roughly equivalent to its cash reserves at the end of the third quarter.

To stay afloat, Nikola recently secured $65 million through a deal with noteholders, which buys the company about one additional month of operating time.

Nikola finally celebrated the commercial launch of its hydrogen fuel cell electric truck at its manufacturing facility in Arizona in October 2023, more than a year after announcing it and facing a scandal whereby its founder and CEO, Trevor Milton, had to step down.

The fairy tale of the hydrogen truckmaker burst like a soap bubble when short seller firm Hindenburg Research released a report accusing Nikola of being “an intricate fraud.” As a result, several investors gradually pulled out.

In March 2020, Nikola Corporation announced its plans to merge with VectoIQ Acquisition Corporation, an SPAC company run by former General Motors (GM) vice-chairman Stephen Girsky. 

Girsky became Nikola Corp’s fourth President and CEO after German automotive veteran and former Opel boss Michael Lohscheller quit after a few months in August 2023. He would resurface later as Polestar’s current CEO.

General Motors was one of the first to take an 11% share in Nikola, which was overvalued at around $13 billion in early August 2020 but estimated to be worth €2 billion at that time. But two days later, the Hindenburg report caused all hell to break loose. By September 12th, Nikola’s stock had fallen by 36%.

Convicted for four accounts

The straw that breaks the camel’s back would be a Nikola One ‘hydrogen’ truck shown in a promotional video driving down a hill. This truck turned out to be a mock-up with no drive train at all. Ironically, it’s a perfect image of what’s happening to the company today. Nikola’s founder and then-CEO Trevor Milton’s ‘lies’ eventually brought him down.

He stepped down as CEO on September 21st and was convicted in October 2022 by a federal court for four fraud accounts during his tenure. Nicola Corporation itself got off scot-free.

But that couldn’t prevent big partners who hoped to make a buck with the promising start-up, making the best of a lousy job and pulling out as fast as possible.

BP started by dropping the intended partnership to build a network of hydrogen filling stations, followed by GM’s announcement to blow up the proposed billion-dollar equity deal they made in November 2020.

The romance between Iveco, the daughter of Industrial Vehicles Corporation, a Dutch-based Italian multinational transport vehicle manufacturing company, ended in a divorce in Italy.

In May 2023, Iveco announced that it would assume full ownership of the joint venture in Ulm, Germany, it had with Iveco. Germany’s major technology and automotive parts supplier also pulled back from a deal with Nikola.