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Embattled Electric Truck Maker Nikola Makes a Big Promise


When Nikola  (NKLA) – Get Nikola Corporation Report Mark Russell said the electric truck maker had an extraordinary year in 2021, nobody argued with him.

Russell was detailing the company’s accomplishments to analysts during Nikola’s fourth-quarter earnings call.

 200-Plus Mile Journey

“What an extraordinary year we had in 2021,” Russell said, according to a transcript of the call. “We delivered the first Tre BEVs to customers, significantly expanded our sales and service network and added more strategic partnerships for hydrogen production hubs, distribution and dispensing.”

Russell said the “trucks are performing extraordinarily well,” completing 200-plus mile journeys on a single charge.

“Our supply chain team continues to diversify our supplier base and build more robust supply chains as we ramp up production,” he said.

And Kim Brady, the company’s chief financial officer, kept the good news coming, telling analysts that Nikola’s delivery commitment for the full year is 300 to 500 trucks with anticipated revenue of about $90 million to $150 million.

“We plan to make sure we always have adequate liquidity to fund the next 12 months of operations throughout 2022,” Brady said.

Nikola reported narrower-than-expected loss but did not record any revenue. The loss came to $90.4 million, or 39 cents a share, compared with $65.5 million, or 38 cents a share, a year ago. 

Adjusted per-share loss widened to 23 cents from 17 cents, beating FactSet’s call for a loss of 32 cents.

‘It’s Real, I Promise.’

Nikola’s delivery commitment is impressive given some of the rather extraordinary events that happened in 2021.

That was the year that the company’s founder, Trevor Milton, was charged with three counts of fraud by the U.S. Attorney’s Office in Manhattan for making false and misleading statements to investors.

Milton was accused of misleading investors on “nearly all aspects” of the business. 

He was charged with making fraudulent statements about the company’s product and technology development between November 2019 and September 2020. Nikola’s shares promptly cratered.

The September time frame is important because that’s when analysts at Hindenburg Research, a noted short-seller, published a note calling the electric-truck startup “an intricate fraud built on dozens of lies.”

Hindenburg cited data from phone calls, text messages and emails that it said detailed false statements.

The firm also referred to video of Nikola truck rolling down a hill that gave the impression it was driving on its own power.

Nikola issued a response saying it “never stated its truck was driving under its own propulsion in the video, although the truck was designed to do just that.”

“The truck was showcased and filmed by a third party for a commercial,” the company said.

Standing under a photograph of the company’s first functioning vehicle in a factory in Ulm, Germany last September, Russell joked “it’s real, I promise,” according to the Financial Times.

The firm also charged Milton hyped his company’s battery technology after becoming aware of issues related to a planned acquisition in October of last year.

 Milton denied the allegations and left the company.

In December of 2021, Nikola accepted to pay $125 million to settle charges brought by the Securities and Exchange Commission related to those statements. 

‘Proof in Their Face’

Russell addressed the penalty during the analysts call, saying that company will pay it off in five installments over two years. 

“We made the first of these payments in December,” Russell said. “As we’ve shared before, the company has already taken action to seek reimbursement from Trevor Milton for costs and damages in connection with the matters the SEC investigated.”

That was the only mention of Milton’s name during the call.

Deutsche Bank analyst Emmanuel Rosner, who kept his hold rating while slashing his price target to $11 from $19, said he was encouraged by “Nikola’s operational progress, especially in addressing its supply chain constraints, bringing it closer to the start of its truck manufacturing and deliveries.”

“Management provided transparency about the procurement status of critical components,” he said in a research note, “especially battery cells and packs, which seems to support its new delivery targets for 300-500 BEVs this year, most of which are already called for by early customers, and >2,400 units in 2023.”

At the same time, however, Rosner said he continued to question the economics of the BEV trucks, “with bill of material considerably larger than selling price and limited room to improve it soon in light of tight battery supply environment.”

And while social media commentary appeared to be generally supportive, there were a few cynics in the crowd.

“The stock price isn’t aware of your fast pace and milestones,” one person tweeted.

“Do you have anything running yet?” another asked

Russell said the company has been having “great customer conversations.”

“If you come to a customer and say, hey, I can replace your diesel truck with a zero-emission truck, perform the same mission you’re performing today, and we have a target to match your…total cost of ownership,” he said. “That’s a proposition that everybody in the world is interested in, of course. But can you do it? Can you actually prove it?”

“And that’s where the conversations are changing because now we’ve got the real trucks on the road, hauling real customer loads on public roads,” Russell said. “And it’s proof in their face.”

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