The stock price of Nikola Corporation, the electric truck company, dropped hard in early trading on Monday morning. While Tesla
TSLA
is established as the world’s most famous and valuable electric vehicle (EV) company, unlike Nikola, it naturally draws comparisons. In fact, the recent Nikola news raises a couple vital questions for Tesla and its outspoken CEO, Elon Musk, about their batteries. We’ll be waiting see if they answer those questions tomorrow at the company’s Battery Day and annual meeting. 

Problems with Nikola started to appear when short-selling firm Hindenburg Research issued a report a week and a half ago that questioned whether Nikola has any significant priority technology behind its plans to build electric trucks and whether the company misled investors. The SEC then began looking into the matter. Back in the spring, the company went public through a reverse merger, and in the summer, it announced a partnership deal with GM which sent stock prices rising (but also exposed that GM would build the batteries for the supposed-EV company). Early this morning, Nikola’s founder and executive chairman, Trevor Milton, resigned. 

Tesla is much older and an established company. It was started in 2003, more than 17 years ago. Tesla delivered 367,656 cars in 2019, whereas Nikola does not yet have a product. If you search for patents assigned to “Tesla” at the U.S. Patent and Trademark Office, you get 565 results, and if you search for patents assigned to “Tesla” with “battery” in the title, you get 126 results (as of the morning of September 21, 2020). Clearly Tesla is a real company with real products, real revenues and protected intellectual property. 

Investors should not see the two companies as the same. For all of the criticism Elon Musk and Tesla get—legitimate and not—they have a real company. Tesla does not regularly turn a profit, and its market cap is probably far outsized for the value it has actually earned. However, Tesla cars and SUVs are driving around on the streets, and its fans love the vehicles. 

Nevertheless, Tesla initially dropped as well this morning when Nikola’s stock price fell. In the first hour and 15 minutes of trading on Monday morning, Tesla’s dropped more than 5% before turning positive later in the day. With five minutes left in trading on Monday, Nikola was down almost 20%. No doubt, the Hindenburg report, the SEC investigation, Milton’s resignation and the swirling doubts surrounding the aspiring electric truck company bring some negative feelings toward the whole EV industry. The two questions raised by the Nikola situation for Tesla are whether Tesla owns enough of the vital fuel cell (battery) technology itself and whether it can manufacture the cells itself in the near future. We still don’t have the answer to either of these, but maybe Elon Musk and his team will tell us more tomorrow at Tesla’s Battery Day.



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