There’s trouble again for hydrogen-powered truck maker Nikola (NASDAQ:NKLA). The company announced its latest attempt to bring in some new cash, a Securities Purchase Agreement. The agreement could bring in quite a bit of help to the company’s coffers, but investors are looking for the exits in Friday’s trading.
The Securities Purchase Agreement in question—filed recently with the SEC—could open up a path to as much as $125 million in funding. The agreement begins with the initial closing of $50 million in notes today, followed by further sales later to come for up to $75 million.
There will be no placement agents or underwriters involved in this issuance, the report noted, which means the company is targeting its own investors directly. After expenses, the company expects to realize $46.5 million from the release. Nikola is expected to pay just 5% interest on the notes, a good rate given today’s environment.
That doesn’t sound good by itself, but it only gets worse when context is added. Indeed, the company has gone through $727 million in cash in the last four quarters alone. Worse, with this new release of debt, Nikola will officially tip the scales and have more debt than cash on hand once it burns through this amount. That increases the stock’s risk considerably for investors.
However, Wall Street seems largely unfazed by this, as analyst consensus still calls Nikola a Moderate Buy. Plus, it offers 187.74% upside potential thanks to its average price target of $6.10 per share.
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