Nikola investors balk at raising share count

Nikola Corp. shareholders voted with their feet in at least temporarily turning aside the electric truck manufacturer’s proposal to increase its authorized shares. If the measure ultimately fails, the startup’s ability to borrow in the future could be hampered.

A shortfall in shareholder proxy votes for the proposal led Nikola to suspend its annual meeting until June 30. 

Nikola asked its owners to authorize an increase in authorized shares from 600 million to 800 million. The shares would not be actively used until registered. They would presumably be used for future financial needs of which Nikola has plenty.

The value of existing shares falls as new shares are registered. 

The company is using a shelf registration of currently authorized shares to pay for expansion of its plant in Coolidge, Arizona. It is also building out a hydrogen fueling infrastructure for fuel cell-powered Class 8 Tre models it plans to begin building in 2023. A a slow ramp-up of battery-electric versions of the Tre is underway.

Nikola Issuing debt for cash

In early May, Nikola cut a deal for $200 million in cash with Antara Capital. Nikola offered convertible notes that can be paid off in cash or discounted shares. The company may sell up to $1.2 billion in stock through a shelf registration of currently authorized shares.

The Antara investment — the loan matures in 2026 and can be paid off at 8% interest in cash or 11% in discounted shares — is part of a strategy to strengthen Nikola’s base of institutional investors over the long term, Chief Financial Officer Kim Brady has said.

Also in May, Nikola tapped an equity line of credit with Tumim Stone Capital for an additional $196 million. Tumim received about 28.8 million new shares of stock.  

“We have been clear about the fact that we’re going to continue to raise capital and we’re going to stay 12-plus months ahead of our spending,” CEO Mark Russell said in an interview with FreightWaves in late April.

More yes votes needed to increase share count

The proposal to raise the number of authorized shares received about 64% of proxies voted in favor, Nikola said in a press release. But the total number of proxies cast was just 42% of outstanding shares. Nikola will spend the rest of the month trying to get enough votes to pass the proposal. Voting continues until 11:59 p.m. EDT on June 29.

Ballot proposals for electing directors; a non-binding advisory vote on continuing to pay certain senior executives $1 a year in salary in exchange for future stock awards based on Nikola’s share price hitting certain levels; and approval of a registered public accounting firm received sufficient votes to pass.

Related articles:

Nikola cuts deal for $200M through sale of senior debt

On the shelf: Nikola may sell up to $1.2B in new stock

Nikola posts first, albeit tiny, gross profit on electric truck chargers

Click for more FreightWaves articles by Alan Adler.

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Editor: Alan Adler