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Nikola (NKLA) Inks 2nd Deal With Tumim to Sell Up to $300M Stock

Nikola's (NKLA) latest deal with Tumim scales up the initial agreement to issue and sell up to $300 million of Nikola stock to $600 million in total.

This story originally appeared on Zacks

Nikola Corporation NKLA recently announced a second $300-million capital raise deal with Tumim Stone Capital, providing the former the right to issue and sell to Tumim up to $600 million of Nikola's common stock in aggregate.

The New York-based investor 3i is the manager and general partner of Tumim, which focuses on public companies. Its goal is to provide transparent investments and form long-standing partnerships with companies with a quest for innovation.

This June, Arizona-based Nikola entered into a share deal with Tumim. Per the agreement, Tumim had committed to purchase up to $300 million of Nikola's common stock. Since the signing of the first agreement, Nikola has issued nearly $47 million of common stock to Tumim.

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Per the second equity line purchase agreement, Nikola has the right, but not the obligation to sell up to $300 million of additional shares of its common stock to Tumim, subject to certain limitations. The shares will be issued at a 3% discount to the three-day forward volume-weighted average price from the date a purchase notice is issued.

Thus, the latest deal marks Tumim scaling up its initial agreement to buy $300 million of Nikola stock to $600 million. This could result in the private investor owning approximately 20% of this electric truck maker.

The equity lines with Tumim, coupled with the estimated cash and cash equivalents, will provide Nikola roughly $800 million of liquidity by the end of 2021. This will provide adequate liquidity to Nikola for sponsoring its expansion plans through the end of 2022, which include the commercial delivery of battery electric trucks as well as the commencement of pilot testing of fuel-cell electric trucks.

The second equity line purchase agreement is a financing tool that allows Nikola to enhance its liquidity, while giving considerable flexibility as the company ramps up toward its production milestones next year. The company has no obligation to fully utilize this option, and continues to explore other sources of financing.

Tumim is thrilled to be part of Nikola’s journey toward large-scale production of zero-emission battery-electric and hydrogen-electric commercial vehicles. The company looks forward to partnering with Nikola over the long run.

Recently, Nikola and Iveco, the truck and bus business of CNH Industrial CNHI, inaugurated the joint-venture (JV) manufacturing facility in Ulm, Germany, dedicated to the development of the Nikola Tre electric heavy-duty trucks. Based on the Iveco S-WAY truck platform with an electric axle co-designed by FPT Industrial, Nikola Tre features Nikola’s advanced electric and fuel-cell technology along with crucial components provided by Bosch.

With these efforts, Nikola is looking to turn its fate after a tumultuous period last year, when it was accused of serious fraud with regard to the company’s EV proprietary technology, in a Hindenburg Research report. Still, being in its nascent stage, Nikola remains a more speculative bet on the EV sector.

Nikola — peers of which include Daimler AG DDAIF and PACCAR Inc. PCAR — currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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