Will Nikola Corp. shareholders vote to dilute the miniscule and still falling value of their shares by agreeing to double the number of authorized shares?
Regardless of the outcome of Proposal 2 due Wednesday, Nikola pledges to keep trying. And it might get its way regardless. Nikola (NASDAQ: NKLA) and needed more than 50% of all shareholders to vote in favor of the increased authorization. Most proposals require a simple majority approval by voting shareholders.
The Delaware Senate recently passed a bill approving proposed amendments to the Delaware General Corporation law. It would reduce the threshold for approval to a majority of the shares voting on the proposal. The pending legislation is expected to be effective Aug. 1.
Under this proposed new law, Nikola, which is incorporated in Delaware, would have enough votes to secure approval for Proposal 2, the company said in a news release on Monday.
4 tries for higher Nikola share authorization in 2022
Nikola sought to increase its authorized shares from 600 million to 800 million a year ago. The company had to adjourn its annual meeting three times before garnering enough votes. Nikola hired a proxy solicitation firm to seek out shareholders, some who may have sold their shares but held them at a time they were eligible to vote.
Company founder Trevor Milton voted his majority stake in the company against the share authorization proposal in 2022. Nikola was undecided whether to reveal how Milton voted his shares this year. But if the measure fails, it is a good bet Milton voted no.
Milton faces sentencing June 21 on three federal fraud convictions. Each is related to lying about Nikola’s technology prowess and accomplishments to drive the stock price higher. Nikola went public is June 2020 via reverse merger with special purpose acquisition company VectoIQ.
A year ago, Milton also had voting control of 39 million shares jointly owned with former CEO Mark Russell. Those voting rights reverted to Russell this month.
Future rides on share authorization increase
The share increase is critical to Nikola’s survival because it lacks the cash to pay interest that was due May 31 on a $200 million loan from hedge fund Antara Capital. Nikola is aiming to start production of hydrogen fuel cell-powered trucks at a plant in Coolidge, Arizona, in the fourth quarter. It can build battery-electric trucks but has switched to a build-to-order basis.
The company has 178 confirmed orders for fuel cell trucks, which would be the first commercially produced Class 8 fuel cells in the U.S., CEO Michael Lohscheller said in a fireside chat with investors.
“The fuel cell truck momentum is very promising,” he said. “There is potential for us to reach positive gross margin and EBITDA [earnings before interest, taxes, depreciation and amortization] on lower volumes than we previously communicated.”
End customer orders for hydrogen fuel cell trucks include 50 orders from AJR Trucking and 20 for Biagi Bros. as a third party for Anheuser-Busch, which committed in 2018 to order up to 800 fuel cell trucks from Nikola. Plug Power converted an order for five of up to 75 trucks for which it signed a letter of intent (LOI).
“We are seeing those LOIs and indications of interest begin to convert to end customer orders and we look forward to growing our order book and building sales momentum,” Lohscheller said.
Nikola shares traded Wednesday at 58 cents, up about 6% before the vote totals were released. The stock is down more than 95% in the past year.
This is a developing story.
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