Shares of Nikola nosedived 25.8% on Wednesday after the Wall Street Journal reported that ongoing discussions with major energy firms including BP are on hold following a short-seller’s report alleging that the company misled investors. The stock is down 10% in Thursday's pre-market trading.
The electric-truck maker has been in talks to partner with energy firms to build hydrogen refueling stations. The potential partners are now hesitant to continue talks with Nikola (NKLA), according to the report. Meanwhile, the partnership has not yet ended and could still materialize.
On Sept. 10, short-seller Hindenburg Research accused Nikola of being an “intricate fraud built on dozens of lies". Hindenburg added “We have gathered extensive evidence—including recorded phone calls, text messages, private emails and behind-the-scenes photographs—detailing dozens of false statements by Nikola Founder Trevor Milton.” Following the Hindenburg report, Milton resigned as executive chairman on Sept. 21.
In reaction to Milton’s departure, Deutsche Bank analyst Emmanuel Rosner cut the stock's price target to $29 (37.1% upside potential) from $50, saying that the news is "clearly another negative development" for the company, as it would now be difficult for the company to sign new partnerships and customers. Rosner cautioned that Nikola shares "could struggle to regain credibility with investors."
At the same time though, the analyst says that Milton's departure "could also serve as a helpful clearing event," which supports its Hold rating on the stock. He believes that the news could bring a "renewed company focus on execution".
Currently, the Street remains sidelined on the stock. The Hold analyst consensus is based on 2 Buys, 2 Holds, and 1 Sell. The $37 average price target implies upside potential of 74.9% to current levels. Shares have risen about 104.94% year-to-date.