Nikola shares tumbled Thursday to a record low since the company’s public debut in early June after Wedbush downgraded the electric truck maker’s stock to underperform from neutral.
Shares sank to as low as $16.15 before recovering and trading above $20 at midday. Recently, the stock was down more than 8% at $19.39. The company’s stock price has been roughly cut in half following fraud allegations made two weeks ago in a report by short-selling firm Hindenburg Research.
Wedbush cited the controversy around the company as well as the resignation on Monday of Nikola founder Trevor Milton as making the stock too risky to own. The firm, which also cited potential battery innovations from Tesla as reason for the downgrade, slashed its 12-month price target to $15 per share from $45 per share.
“The Nikola story changes with Trevor Milton gone from the company,” Wedbush analyst Dan Ives wrote in an investor note Thursday morning. “Despite the controversy and noise surrounding Milton, he was the visionary, architect and internal/external force driving Nikola for the coming years and we believe he leaves a huge void that is hard to replace.”
Stephen Girsky, former vice chairman of General Motors and a member of Nikola’s board, succeeded Milton as executive chairman.
Hindenburg Research accused Milton of making false statements about the company’s technology to attract investors and deals with other automakers.
Milton and the company have consistently rebutted the claims, even alluding to potential legal action against the firm. Hindenburg Research has stood by its report, which has reportedly sparked inquiries into Nikola by the Securities and Exchange Commission and Department of Justice. The separation deal requires Milton’s cooperation in any and all investigations and potential litigation.
The report, titled “Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America,” was released two days after the company announced a deal with GM that sent both companies’ shares soaring. It characterized Nikola as an “intricate fraud built on dozens of lies” by Milton.
Nikola began trading on June 4 after a reverse merger with VectoIQ, a publicly-traded special purpose acquisition company headed by Girsky. The deal was announced in early March.