NKLA - Nikola

[Sunrider]

... I know there's already a thread on the general board, but since this is about an actual trade, I thought I'd open one here.

 

I notice that this has been bid up tremendously - I have no view on the product, just the price move seems excessive. The company has warrants outstanding. From the latest Q:

 

"The Company may call the Public Warrants for redemption:

 

· in whole and not in part;

· at a price of $0.01 per warrant;

· upon a minimum of 30 days’ prior written notice of redemption; and

· if, and only if, the last reported closing price of the ordinary shares equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders."

 

Unless I'm daft, this would seem to indicate that the warrants should only ever be worth a maximum of $6.5, given that it is in the interest of the company to redeem them for a penny when the price is above the threshold for long enough (rather than having people exercise them and having to issue them shares at $11.50). Given that there are 23m warrants and ca. 60m shares o/s, it would seem the company should want to avoid that dilution.

 

On that basis, wouldn't the warrants here be a much better short than the common, or am I totally misunderstanding either the company's incentives or the warrants redemption would work? (Note also, the company has not yet filed a registration statement so the warrants cannot be exercised currently.)

 

Edit: I suppose the 30 days notice periods complicates things somewhat in that, provided a registration statement has been filed, one can exercise and the warrants should thus trade up to the difference between current strike and price. If not registration statement has been filed one can still exercise cashless ... so on that basis they still have more value than the $6.5, and I have to correct the above.

 

On this basis, this would be a bet on either the stock price falling to make the warrants worth less than the current ca. $31.

 

Thank you!

[Sunrider]

Instead of a re-edit:

 

Given "No Public Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of Common Stock issuable upon exercise of the Public Warrants and a current prospectus relating to such shares. Notwithstanding the foregoing, if a registration statement covering the issuance of the shares issuable upon exercise of the Public Warrants is not effective within 90 days from the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement or a current prospectus, exercise Public Warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. If an exemption from registration is not available, holders will not be able to exercise their Public Warrants on a cashless basis."

 

... would it be possible for the company to give a redemption notice in ca. 16 days or so (20/30 days > 18), then redeem at $0.01 30 days after that, and nobody ever had the chance to exercise cashless or otherwise (provided company does not file/get an effective registration statement over that period)?

 

hmm ...

[Jurgis]

Sold half of my beer-sized VTIQW/NKLAW position today. Now it can go up another 10x.

[rb]

Are we really doing this? Ok then.

 

There's no way i would short this. You could do it for non-economic amounts for shits and giggles. But if you want to do it for real I would look to see if there are any idiots out there willing to sell you long term puts. I haven't looked at it, but my guess is that there aren't.

[Guest jalebijim]

Are we really doing this? Ok then.

 

There's no way i would short this. You could do it for non-economic amounts for shits and giggles. But if you want to do it for real I would look to see if there are any idiots out there willing to sell you long term puts. I haven't looked at it, but my guess is that there aren't.

 

 

I naked shorted some deep in the money calls, nothing big(just for entertainment).

 

As they say on reddit WSB, YOLO!

 

Most of the people on this board are seasoned long-term investors and don't realize that there are a lot of bored kids at home who are using their stimulus checks to gamble on Robin Hood. A lot of the small cap liquidity might be coming from that.

[rb]

Are we really doing this? Ok then.

 

There's no way i would short this. You could do it for non-economic amounts for shits and giggles. But if you want to do it for real I would look to see if there are any idiots out there willing to sell you long term puts. I haven't looked at it, but my guess is that there aren't.

 

 

I shorted some naked deep in the money calls, nothing big(just for entertainment).

 

As they say on reddit WSB, YOLO!

Expiration? Also did you check what the open interest was on that?

[Guest jalebijim]

Are we really doing this? Ok then.

 

There's no way i would short this. You could do it for non-economic amounts for shits and giggles. But if you want to do it for real I would look to see if there are any idiots out there willing to sell you long term puts. I haven't looked at it, but my guess is that there aren't.

 

 

I shorted some naked deep in the money calls, nothing big(just for entertainment).

 

As they say on reddit WSB, YOLO!

Expiration? Also did you check what the open interest was on that?

 

 

There were no short shares available to borrow and I rarely use options. This is pure speculation/gambling. I went out a few months with deep in the money calls.

 

Since I am long Tesla in my gambling account it seemed like a good pairs trade.

 

[rb]

That sucks! That means no puts for rb  :(. It's a shame too cause this thing is one of the easiest things I've ever seen.

[Guest jalebijim]

That sucks! That means no puts for rb  :(. It's a shame too cause this thing is one of the easiest things I've ever seen.

 

 

I have not confirmed this but read the smart money knows this thing is mostly hot air, so the puts are commanding crazy premiums.

[Guest jalebijim]

It is trading at 136 times projected 2024 EBITDA.  :o

 

Can't make these things up, truth is stranger than fiction!

 

Hydrogen tulips FTW!

[TwoCitiesCapital]

That sucks! That means no puts for rb  :(. It's a shame too cause this thing is one of the easiest things I've ever seen.

 

 

I have not confirmed this but read the smart money knows this thing is mostly hot air, so the puts are commanding crazy premiums.

 

Then do put spreads. Buy puts that are a bit in the money so time/vol premium is small and sell OTM puts against it. Larger cash outlay, but you don't have to worry about the "expensiveness" of them as it's close to all intrinsic value.

[Jurgis]

I should be up a billion dollars!

[Sunrider]

Thanks All.

 

With respect to my second post, does anyone (possibly with experience in this field) have a view on whether that scenario could eventuate? If so, that really would be a crazy economic benefit for the company if they just sat on their hands, wait for the price to hit the 20 day mark, serve notice and pay a penny while nobody can exercise ...

[Hielko]

People will be able to exercise them before the mandatory redemption, so value isn't capped at $6.5.

[Guest jalebijim]

Update:

 

My September 12.5 strike naked call short just got assigned.

 

I'm now the proud owner of negative 700 NKLA shares.

 

 

 

 

 

 

 

[rb]

Since this thread started I've been wondering who would actually make these trucks for them. The company that has the capability of doing this is Magna. Sure Ford could make easily these trucks but I doubt they have any willingness to do so.

 

The thing about Magna is that their contract manufacturing division is in Austria. Which would mean a 25% tariff for these trucks coming into the US.

 

Is anyone aware of a non-OEM in the NAFTA region that has the capability of building a full size truck?

[Pelagic]

No position but I found this article pretty interesting. Of course we all know established companies making similar products for decades are bloated with fools who can't allocate capital correctly so there will be massive cost savings using new tech.

 

https://seekingalpha.com/article/4351653-questioning-nikolas-business-model-assumptions

 

The Nikola $173,624 cost assumption is also difficult to justify when adding up core components which make up the truck.

 

Starting with cost of the chassis, one useful reference is the popular Peterbilt 389 truck, which is produced in high volume and can be ordered as a “glider” (no engine or transmission) for $126,000. Given this, it would be reasonable for Nikola/Iveco to assume its truck chassis, including advanced autopilot and other features, would require circa $100,000 before adding fuel storage cylinders, the fuel cell stack, motive/regen batteries, and electric motors.

 

This leaves Nikola with about $29,000 remaining in the budget for the fuel cell stack, regenerative batteries, and electric motors. This would be difficult to achieve given that Sunline Transit, not long ago, budgeted $686,00 for one fuel cell stack and power distribution system alone

[Guest jalebijim]

Since this thread started I've been wondering who would actually make these trucks for them. The company that has the capability of doing this is Magna. Sure Ford could make easily these trucks but I doubt they have any willingness to do so.

 

The thing about Magna is that their contract manufacturing division is in Austria. Which would mean a 25% tariff for these trucks coming into the US.

 

Is anyone aware of a non-OEM in the NAFTA region that has the capability of building a full size truck?

 

 

 

It is not easy or cheap to build an electric car, not to mention the physics problems with hydrogen. You can't fight physics!

 

Dyson lost $600 million trying to build one and cancelled the project. 

 

Is anyone other than Tesla and major OEMs actually building them?

 

If the OEMS are loosing money on them and having problems how can it be outsourced cheaply? If anyone has a shot it's the Chinese(free money, IP theft, cheap labor, no environmental laws etc).

 

Tesla lost money for a decade trying to build one.

 

https://www.theverge.com/2020/5/17/21261473/james-dyson-electric-vehicle-tesla

[rb]

Where I was going is that these guys said they would outsource production. There are contract manufacturers but the only one with the capability of building a full size pickup that I know of is Magna Steyr. Even other significant contract manufacturers like Pininfarina probably don't have the capabilities to deliver on such a project.

 

My question was is if I'm missing anything here. Is there a contract manufacturer in the NAFTA region with Magna's capabilities?

[Jurgis]

Where I was going is that these guys said they would outsource production. There are contract manufacturers but the only one with the capability of building a full size pickup that I know of is Magna Steyr. Even other significant contract manufacturers like Pininfarina probably don't have the capabilities to deliver on such a project.

 

My question was is if I'm missing anything here. Is there a contract manufacturer in the NAFTA region with Magna's capabilities?

 

You're not thinking like asset-lite second-level thinker.

 

They can outsource the outsourcing! Then they could provide outsourced outsourced truck as a service.

 

It's all hydrogen anyway! Hint, hint: what do you get when you burn hydrogen? Spoiler: hot air

[wescobrk]

I wish I could ask the people/companies that booked their orders for the truck that comes out in 2 or 3 or 4 years or whatever it is when they could get a Tesla semi, according to Elon, in 2021.

 

Is the Nikola truck a lot cheaper? Why wait another couple of years and risk going with a company that has never produced a vehicle when you can buy one next year with a company that has a decade of producing vehicles?

 

That being said, I wouldn't be surprised if this stock goes north of $100 a share.

This looks like a scary short.

David Einhorn has looked like an ass for shorting Tesla for years.

 

I agree on how crazy the valuation is though.

[Guest jalebijim]

Update:

 

My September 12.5 strike naked call short just got assigned.

 

I'm now the proud owner of negative 700 NKLA shares.

 

 

 

 

 

My trade was very profitable and I made money on shorting the calls, but just found out what the short borrow fee is.

 

Any one want to guess?

 

510%...... :o

 

Covered my short due to the 510% borrow fee. Will maybe short calls again if this thing pops too much on Badger day June 26th.

[rb]

That's why I said I at the top of the tread that now way you should short it.

 

There are very few shares available. That's why the knuckleheads on Robinhood and eToro can drive the price into the stratosphere. That's also the reason you can't get a decent option on this bag of shit. The dealers can't get shares to hedge their delta. Though I'm sure the ppl that own the big blocks are slowly selling to the morons in exuberant disbelief of the good fortune than stumbled on them.

[aws]

The prices of puts and calls are so out of whack.  Jan 2021 $40 puts are more expensive than $40 calls when the stock is trading at over $60.  Puts are so expensive you can't realistically make money off them.  Calls are so cheap they probably aren't worth shorting.  They'll have very little premium, and if you get assigned you might be paying over $1 per share per day when short, and when this happened to me in the past I got charged the interest even though I closed the short the same day.  It's obviously overvalued, but until borrow rates come down you can't really do anything with it.

[wescobrk]

That's why I said I at the top of the tread that now way you should short it.

 

There are very few shares available. That's why the knuckleheads on Robinhood and eToro can drive the price into the stratosphere. That's also the reason you can't get a decent option on this bag of shit. The dealers can't get shares to hedge their delta. Though I'm sure the ppl that own the big blocks are slowly selling to the morons in exuberant disbelief of the good fortune than stumbled on them.

 

My apologies about putting the comment about not shorting it. I was just making a general comment.

This will be a fascinating case of psychology. This damn thing has arguably $25 billion of brand value based I think just on the first name of Tesla.

We have seen this before with blockchain, marijuana and others as they became a bubble then popped. If this company can actually execute and the price of hydrogen comes down dramatically over the next 10 years then maybe a $300 a share in the next 3 years, if not, then in the single digits.

Interesting to watch over the years. I tried to look up more on the CEO but haven't found much so far.

 

Apparently Andrew Left of Citron would love to short it. He thinks it is only worth $40. I thought he would say something like single digits. Even he thinks it is "worth" close to $20 billion.