Nikola Tumbles on Reverse Split Push, NASDAQ Delisting Fears

Nikola Corp.’s shares sank on Thursday after Chairman Steven Shindler pressed for a reverse stock split to prevent a potential NASDAQ delisting.

The stock of the Arizona-headquartered automaker plunged 26.73% to $0.72 per share on April 11, followed by a 0.58% after-hours slide. Furthermore, market analysts predict a 2.16% stumble to $0.70 apiece on the following trading day.

The firm’s filing for its April 29 annual meeting included a proposal for a reverse stock split to boost prices. The reverse split starts at 1-for-10 and goes as high as 1-for-30 while also reducing authorized common stock from 1.60 billion to 1.00 billion.

A reverse split will reduce the number of outstanding Nikola shares, resulting in a surge in share price. The move will immediately solve the company’s NASDAQ deficiency and eliminate the threat of getting delisted from the tech-heavy exchange.

Simultaneously, the US automaker will add 130.00 million shares to its available-for-issuance common stock to expand its 2020 Stock Incentive Plan. Shindler said the higher price might also attract new investors, particularly those averse to low-priced stocks.

He also warned of Nikola founder Trevor Milton’s attempt to regain control over the company by nominating several directors. Milton was sentenced to four years in prison in December last year for lying to investors about the firm’s technologies.

NASDAQ May Delist Nikola on  Price Deficiency

On January 19, NASDAQ notified Nikola that it must close at $1.00 or above for ten straight trading days on or before July 17. If the battery electric vehicle (BEV) manufacturer fails, it will receive a 180-day extension to try again.

The tech-heavy exchange may begin delisting proceedings for Nikola as early as January 13 next year. Still, Shindler reiterated that the company should not be distracted by the threat of delisting and focus on resetting its financial foundation.

Due to the massive reduction in trading volume, delisting leads to a decline in liquidity, capital, and other performance metrics. NASDAQ sends a deficiency notice once a company trades under the $1.00 minimum closing price for 30 straight business days.

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