Investing

Nikola's Penny Stock Short Interest

Douglas A. McIntyre

Published: October 30, 2022 11:41 am

A penny stock is generally defined as one that trades for less than $5. Low emissions truck company Nikola has been one for a long time. Short sellers continue to bet the figure will go lower. Short interest in the stock is 34% of the shares outstanding. That is among the highest of all companies traded on U.S. exchanges.

In the last three months, Nikola’s stock has dropped 50% to just above $3. Founder Trevor Milton was recently convicted of security fraud. A close look at the case shows it has nothing to do with the share price. Nikola’s financial figures have been the sole reason for the sell-off.

Nikola recently bought Romeo power, which manufactures EV batteries. This sort of horizontal integration will not improve Nikola’s situation. It is too late for that to happen.

Nikola will announce earnings in the upcoming week. There is no reason to believe they will be better than recent quarterly figures. It delivered 48 of its trucks. CEO Mark Russell commented, “Our momentum continued during the second quarter as we began delivering production vehicles to dealers and recognizing revenue from the sale of our Nikola Tre BEVs.” Fifty trucks are so small a number Nikola won’t last long enough to produce many more.

Nikola lost $173 million in the last quarter. For the first half of the year, the number was $325 million.

It is obvious why short sellers have surged into the stock. It is equally obvious why they will make money.