Nikola (NASDAQ:NKLA) Corporation (NASDAQ:NKLA), a manufacturer of zero-emissions vehicles, announced on Wednesday that it has entered into agreements to amend the terms of its outstanding convertible notes. The company, alongside its wholly owned subsidiary and the trustee, has adjusted the conversion privileges for its convertible senior notes due 2026, following consent from the note holders.
The amendments, formalized through supplemental indentures, allow note holders to convert their debt at a reduced price of $3.116 for a limited time, contingent upon the company raising at least $65 million in gross proceeds from the sale of its common stock. The changes also introduce a 9.9% cap on the beneficial ownership resulting from any conversions, to prevent any single holder from gaining excessive control.
Additionally, Nikola has secured a waiver related to its Series B-1 Senior Convertible Notes due 2025, enabling the company to undertake the specified equity raise without adhering to prior redemption requirements.
The agreement also stipulates that if Nikola uses the net proceeds from the equity raise to repay the outstanding amounts on the Senior Convertible Notes, totaling $39.4 million, all obligations under these notes will be discharged.
The news follows a Securities Purchase Agreement dated August 19, 2024, which will be terminated upon full payment of the aforementioned amount.
The details of the supplemental indentures will be included in Nikola's forthcoming Annual Report on Form 10-K. This report is based on a press release statement.
In other recent news, Nikola Corporation has been under scrutiny as it grapples with financial challenges. The electric vehicle manufacturer reported a higher-than-expected cash burn rate in the third quarter of 2024, leading TD Cowen to maintain its Hold rating on the company but reduce the stock price target from $10.00 to $4.00.
Nikola's management disclosed an operational runway of approximately five to six months, suggesting a need for additional funding or strategic partnerships.
Despite these financial hurdles, Nikola has reported significant growth in the same quarter. The company achieved record sales of 88 hydrogen fuel cell electric trucks, marking a 78% increase in fleet adoption and a nearly 350% surge in hydrogen dispensing at its stations year-over-year. Gross revenue for the quarter rose to $33 million, up from $31 million in the previous quarter, although the gross loss widened to $62 million.
These recent developments underscore the dual nature of Nikola's current situation, marked by both achievements and challenges. The company's future hinges on its ability to secure additional funding or form strategic partnerships, as suggested by the analyst from TD Cowen.
Amid these uncertainties, Nikola remains committed to expanding its zero-emission ecosystem, maintaining its guidance for 300 to 350 fuel cell truck deliveries for the year.
InvestingPro Insights
Nikola's recent financial restructuring efforts, including the amendment of its convertible notes terms, come at a critical time for the company. According to InvestingPro data, Nikola's market capitalization stands at a modest $172.48 million, reflecting the challenges it faces. The company's financial health is under pressure, as evidenced by an InvestingPro Tip indicating that Nikola is "quickly burning through cash."
Despite these challenges, there are some positive signals. Nikola's revenue growth has been impressive, with a 153.71% increase over the last twelve months as of Q3 2024. This aligns with another InvestingPro Tip suggesting that "analysts anticipate sales growth in the current year." However, profitability remains a concern, as the company reported a negative gross profit of $212.48 million in the same period.
The stock's current price of $3.12 is trading near its 52-week low, at just 9.04% of its 52-week high. This price action reflects the market's cautious stance on Nikola's prospects. Investors considering Nikola should note that InvestingPro offers 18 additional tips for a more comprehensive analysis of the company's situation.
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