Why Hydrogen Truck Developer Nikola's Stock Is Trading Down

Shares of hydrogen and electric truck maker Nikola Corporation NKLA have resumed their recent downtrend after staging a rebound Tuesday that helped break a three-session losing streak.

What Happened: Nikola said in a statement Wednesday that it will redeem all of the public warrants issued by VectoIQ — the special purpose vehicle that it merged with  for a public listing — that remain outstanding at 5 p.m. ET Aug. 21.

The warrants that were privately placed will not be redeemed, Nikola said.

The redemption is planned as the share price performance target set under the warrant agreement has been fulfilled, the company said.

Nikola's S-1 registration statement for the sale of all shares owned by VectoIQ and those owned by Nikola insiders has become effective following the receipt of SEC approval, Nikola said in a Friday SEC filing. 

"Practically speaking, this means that Nikola's 24m warrants are now exercisable, giving holders the right to buy NKLA shares for $11.50; and this also registers the 53.4m shares owned by PIPE investors, enabling them to be traded on the market," Deutsche Bank analyst Emmanuel Rosner said in a note.

Given the possibility of a portion of these shares hitting the market, Nikola shares could see large technical selling pressure, the analyst said. 

What's Next: The stock is a better bet in the long-term, according to sell-side analysts.

Once the stock stabilizes after the initial negative reaction, Rosner sees a potentially attractive entry point for investors into a rare pure play on zero-emission commercial trucks.

At last check, Nikola shares were down by 7.04% at $36.95. 

This is on top of the 27% decline the shares have experienced since July 15.

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Photo courtesy of Nikola.