Electric truck start-up Nikola Corp. is doubling the size of its line of credit with a private lender to $ 600 million, enough credit to boost production through 2022, the company said on Monday.
Nicolas (NASDAQ: NKLA) will sell up to $ 300 million of shares to Tumim Stone Capital at a 3% discount and make an upfront payment of 252,040 shares valued at $ 3,011,878 at Monday’s closing price of 11.95 $. The initial 75 basis points and the haircut are the same as the terms of the $ 300 million first equity line of credit (ELOC) announced by Nikola and Tumim on June 11.
Compared to the cost of a larger trailing stock offering, Nikola got a good deal – less than 4% versus 23% – including 3% brokerage fees and a 20% price discount. action.
“If you were to make a follow-up offer now, the discount is too high and you have to commit to a certain amount of capital,” Nikola CFO Kim Brady told FreightWaves. “If you think about our ELOC, it gives us flexibility as we come to the point where we issue additional shares. “
The other disadvantage of a public offer would be the dilution impacting current investors.
The conditions remain the same
Like the first ELOC, from which Nikola raised $ 47 million through share sales, Tumim agreed that he would not sell the shares short, which means borrowing the shares in a bet that their price would lose value. In exchange, Nikola agreed to avoid seeking a line of credit from a financial institution. Nikola did not rule out a follow-up offer if the conditions were right.
“We’re always looking at what’s the best source of capital at any given time,” Brady said.
As the first phase of a new assembly plant nears completion in Coolidge, Ariz., Nikola moves forward with pre-production of Class 8 battery-electric day trucks and early model releases. of hydrogen fuel cells. Both are based on the S-Way from Iveco, its European joint venture partner, which recently completed renovations at a Nikola plant in Ulm, Germany.
“The equity lines with Tumim, along with the estimated cash and cash equivalents, will allow Nikola to access approximately $ 800 million in liquidity by the end of 2021,” said Nikola CEO Mark Russell , in a press release. “We believe this will provide Nikola with sufficient liquidity to fund our announced operational milestones through the end of 2022.”
Rediscover its credibility “brick by brick”
Brady said Nikola still has a lot to prove following a scandal that began with a report from a short seller that founder and alleged former executive chairman Trevor Milton lied about the company’s technological achievements to drive up the share price. Milton, who resigned a year ago, faces three federal charges of criminal fraud and charges from the Securities and Exchange Commission.
Milton was charged on July 29 and is free on $ 100 million bail.
“We understand that we are building our credibility brick by brick and we recognize that this is going to take some time,” Brady said. “We still have some uncertainty around the SEC and we are in the process of trying to resolve this issue. We think that at the end of the day there will have to be some sort of settlement, which is very typical. “
No criminal charges
Nikola is unlikely to face criminal charges from the U.S. District Court for the Southern District of New York, which laid the charges against Milton.
It is important to get a settlement from the SEC “so that there is no artificial cap on the price of our shares,” Brady said.
Milton, who has sold millions of Nikola shares since his indictment, remains the largest shareholder in the company with around 15% of the shares outstanding. Russell owns approximately 12% of the shares of the company.
Tumim is not expected to hold Nikola shares for the long term. “They won’t sell stocks short. It doesn’t mean they won’t sell the shares, ”Brady said.
But Tumim managing partner Maier Tarlow said Tumim looks forward to continuing to be a long-term partner with Nikola.
Nikola goes private to raise $ 300 million in new money
Nikola’s Case Against Trevor Milton: “Lied in Almost Every Way”
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