Nikola's Chapter 11 Bankruptcy: A Cautionary Tale for EV Investors

Wow, what a rollercoaster ride it's been for Nikola Corporation (NKLA) investors! The once-promising electric truck maker has just filed for Chapter 11 bankruptcy protection, according to a court filing. As an avid follower of the EV industry, I can't help but feel a mix of sadness and caution as I reflect on the lessons learned from Nikola's dramatic fall from grace.

First, let's take a step back and appreciate the potential that Nikola once held. Founded in 2015, the company aimed to revolutionize the commercial trucking industry with its zero-emission hydrogen and battery-electric trucks. With a charismatic founder, Trevor Milton, at the helm, Nikola's stock soared after its 2020 IPO, reaching a peak valuation of over $30 billion. However, as we now know, the hype and promises couldn't mask the underlying issues that would ultimately lead to the company's downfall.

One of the primary factors contributing to Nikola's financial struggles is its rapid cash burn. The company's cash reserves have dwindled from $464.7 million at the end of 2023 to just $198.3 million by September of the following year. This decline in liquidity reflects the company's ongoing financial difficulties and its inability to generate sufficient revenue to cover its expenses. Additionally, Nikola has been incurring substantial losses on each truck sold, amounting to hundreds of thousands of dollars per unit. These per-unit losses have put immense pressure on the company's finances, contributing to its financial struggles.