The outlook that CEO K. R. Sridhar gave at the press conference on the figures for the third quarter of 2022 sparkled with optimism for the company. The total output capacity in SOFC fuel cell stacks would reach 600 MW within the year. The capacity of the electrolyzers would lie at 1.3 GW that year. Both figures should experience a doubling in 2023, after the new factory in Fremont, California commences production in the third quarter of 2022. There, Bloom has a highly efficient setup regarding the manufacture of both of its stack types (SOFC and SOEC), as the new production facilities can produce these simultaneously or in alternation. I imagine the stacks that will be produced are those that will give the highest margin according to the market environment and demand.
The profit margin in the fourth quarter of 2022 could even exceed 30 percent, as the effects of the Inflation Reduction Act with its many incentive programs are now revealing themselves in the USA. Additionally, Bloom is fulfilling the major order from SK Ecoplant in South Korea according to plan, which has a worth of over 4 billion USD. The stacks and energy servers are being paid according to a take-and-pay arrangement. Bloom is fully on track with deliveries and can increasingly turn to US customers as well.
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One sign of how well this cooperation is going is the announcement that SK Ecoplant has paid the second outstanding installment in the amount of 311 million USD for the intended stake in the company (that’s 23.11 USD per share, cash inflow expected in the first quarter of 2023). SK Ecoplant is getting Bloom shares in the equivalent amount. The already held convertible preferred stock from Bloom is simultaneously being converted into common stock. After completion of the transaction, SK Ecoplant should hold an over eight percent share in the company.
A big shareholder like SK Ecoplant can only be wished for, because it not only brings capital but also enables increased orders and customer relationships. (Perhaps GDS Holdings in China?) With over 670 million USD in the bank (after the most recent capital increase to 26 USD per share) and the 311 million USD from SK Ecoplant, Bloom has enough liquidity to support its growth with its own means, it was mentioned by the management board at the annual press conference.
Boom SOFC systems in ship transport
In the area of ships of various types (cruise, container, bulk carrier), Bloom expects a new, robust field of activity. Working with MSC (Mediterranean Shipping Company) means concrete business with cruise ships, in which the SOFC systems from Bloom are all-rounders, meaning they can use LNG as well as green ammonia, green methanol and hydrogen as propulsion energy for the ship. This makes the system from Bloom extremely interesting for many maritime transport companies. This is a major competitive advantage that should not be underestimated. Substantial orders are expected as early as 2023.
Order from Taylor Farms
Recently, an order was obtained from the leading US food producer Taylor Farms in relation to a vegetable production facility in California. The company would like to make itself un-dependent on the public grid through an FC power plant (microgrid) and become more environmentally friendly in terms of energy. For this, 6 MW in FC output will be combined with 2 MW in solar power and 2 to 4 MW in battery output. With this, they can be energy autonomous and on the way to low costs and environmental-friendliness. From the associated press release can be read that Taylor does not want to stop at one FC power plant, but wants to eventually expand this to other production facilities.
Power outages fill order books
Not least in California should the energy networks become more reliable and natural disasters (forest fires, etc.) be better withstood. Here alone, the grid-independent FC power stations from Bloom have an enormous growth potential, as weather conditions there are responsible for power outages of 1,700 to 5,000 MW per year and cause major damage. Energy security is a societal good for which Bloom can provide the right answers and technologies.
The turnover increase in the third quarter of 41 percent compared to the previous quarter, to 292 million USD, is remarkable. That was expected, since 70 percent of the revenue was coming in the second half of the year. What’s new is that Bloom sees even 40 percent of turnover for the year coming in the fourth quarter. By our calculation, that would make a plus of 400 million USD. Wow! That would then be a total turnover of 1.1 billion USD for 2022 – everything along the line of expectations and a little more.
Summary
With this guidance, it only makes sense to buy more than once. Maybe Bloom Energy will one day have a higher worth than competitors like Plug Power. An exciting 2023 is just around the corner, and the unfolding fourth quarter will serve as fertile ground. The numbers will come in during the first week of February 2023.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
Author: written by Sven Jösting December 12th, 2022
Ballard Power is positioning itself as a leading player in the use of fuel cells in the transportation sector. The Canadian company wants to occupy a top position in the new megatrend and expand it to benefit from the tremendous growth expected in the coming years (orders and scaling = revenue and profit). As outlined at the last press conference on the accounting for the third quarter, Ballard is developing a global manufacturing strategy that has the goal of approaching cost reduction potentials and scaling effects as well as supply chain topics on site and using this to their advantage. This is referred to as a local-for-local strategy. It means that Ballard is erecting its own production facility within each country or continent so that it can benefit from the local conditions by being locally present. The sourcing of supply parts, but also the research and development as well as supply chain, will be established there. A perfect example is China.
Ballard is maintaining a joint venture with Weichai (49:51), which today already has an FC stack production capacity for 20,000 vehicles (buses, forklifts, trucks) that can very quickly be ramped up and expanded as needed, which is thoroughly the aim. Ballard is now planning, with an invest in the amount of 130 million USD over a period of three years, to establish its own MEA production as well as its own research center in China. The site was chosen to be Jiading Hydrogen Port, located in the Greater Shanghai metropolitan area, as this region has one of the largest clusters of automotive supply companies in China. The MEA production here should provide for 20,000 vehicles.
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The membrane electrode assembly (MEA) is the core of the fuel cell and accounts for a considerable 60 percent of its cost. With this production facility, Ballard will become one of the largest MEA producers in the giant land. In addition to the support programs, however, China has set conditions for manufacturing in the country. In order to a) participate in these subsidy programs and b) not be subjected to increasing tariffs, parts like MEAs should be imported from China. We’re talking about tariff rates starting at three to five percent and rising to fifteen percent within three years. This would have a massive negative impact on the future profit margin. Ballard president Randy McEwen said on the matter, “Imported MEAs have a competitive disadvantage.”
Support programs are at the starting blocks in China
Until now, it was only individual provinces and large cities like Guangdong und Shanghai that recognized hydrogen and fuel cell technology as a growth market for themselves. But the government of China, as proclaimed during the 20th Communist Party Congress with the associated funding programs, however partially defined, is increasing committing to this field. Very large programs are expected. So far, Ballard’s China business is turning out smaller than hoped for, which was set back by among other things COVID-related restrictions, which contributed to a considerable 68 percent decline in activities there. However, this is only a slice in time – the potential could not be greater, as China will in great likelihood approach hydrogen and fuel cells in the same way it has done solar cells and wind power.
Great interest in rail vehicles
In the transportation sector, Ballard is optimally positioned. From Siemens Mobility already stands an order for 100 FC modules, and also a letter of intent for another 100. In Europe alone, 13,000 locomotives will be converted from diesel to hydrogen or battery-electric within the next 15 years, with 3,000 of these for Germany. This spirit could further spread to the USA and many other countries. In addition to the first H2 train in India, Ballard has been active in the US. It can be assumed as very probable that after the pilot projects, large orders will arise from there.
For the Canadian Pacific Railway (CP), the FC manufacturer is already in the process of converting four different types of locomotives from diesel to hydrogen power. CP has over 1,400 locomotives in use, so with this customer alone is the potential for many rail vehicles. CP represents the possibility of many other railroad companies, for example Amtrak. FC use in trains is seeing a breakthrough, but for now we’re only looking at the start.
Ballard is the first provider of its kind for rail vehicles in the USA. The company Stadler Rail from Switzerland is putting a train on the tracks there equipped with FC systems from Ballard. There are also whispers that Amtrak California has plans for another 27 trains, which would likely mean an order for Stadler and, indirectly, for Ballard. The order from Siemens Mobility (14 modules for 7 Mireo Plus H trains) as well as the declaration of intent for up to 200 further modules – 100 of these fixed – we already reported.
Here, huge markets are arising. In the USA alone, only one percent of all railroads are electrified. The vast remaining trains can be outfitted with batteries (short-range) and fuel cells (long-range) as well as combination models (FC as range extender). In addition, Ballard is associated with the world’s largest rail vehicle corporation, CRRC in China, which has already tested streetcars with Ballard inside (first with blue hydrogen, to be replaced by green as soon as sufficiently available).
Investment in Quantron
Together with Neuman & Esser, Ballard has built an H2 alliance with the German commercial vehicle manufacturer Quantron. This concerns trucks and buses. Both partners participated in the initial invest of 50 million EUR. At the 2022 IAA Transportation event, Quantron presented its truck with type designation QHM (see p. 32), which gets its power from Ballard fuel cells. Eventually, these vehicles could have a range of up to 1,500 km (930 mi) – at least in Norway – with 120 kg of H2. Hydrogen on board and Ballard inside. Quantron recently announced an initial order for 500 trucks from the USA. There, competitors like MAN (which may also commit to fuel cells starting 2030) and Daimler Truck have let (too much) time go.
The partnership Ballard–Quantron–NEA addresses the issue of infrastructure as well. It is to develop hydrogen fueling stations as well as H2 production capabilities, to be able to offer customers a complete package. Such cooperations – like already existing, very successful ones with various bus manufacturers –Ballard will be able to mobilize in the coming years to ramp up production capacities for its FC modules and be at the forefront of this new world market in terms of timing. The stock market also cannot avoid valuating this potential.
Third-quarter figures don’t say much
The company figures (turnover, results) will for the foreseeable future not have relevance for Ballard that analysts can see, as the company is positioning itself step by step in different regions of the world to benefit from very high long-term growth as a market leader. In the third quarter, the company had a turnover of 21.3 million USD, which corresponds to a year-on-year decrease of 15 percent. Indicative power: zero. Loss per share: minus 0.14 USD. Cash and cash equivalents lay at 957.4 million USD on September 30, 2022. The stock market value therefore amounts to only 1.6 billion USD. The order volume, however, rose by over 30 million USD, to a worth of 101.7 million USD during this quarter.
Last but not least: 25 FC modules ordered by Solaris
According to the latest news, the Polish bus operator Solaris has given Ballard an order for another 25 FC modules to be used in Poland. Such orders we will now see frequently and with an increasing number of modules requested, since many cities, in Europe especially, feel obligated to stem climate change and reduce their carbon footprints with the help of such emissions-free buses. We would not be surprised if cities like Hamburg were also to place larger orders for FC modules or FC buses.
Summary
The share price in the next 12 to 18 months will not be driven by quarterly results, but by news from the individual partnerships – so-called platform partnerships – and by strategically important news. Some of the orders (FC stacks/modules) for rail vehicles, trucks, buses and ships may also greatly shape the development of the price, but the effects of the really big orders, contingent on the ongoing scaling measures in the form of establishing production sites, will not take hold until sometime in 2023 and then properly from 2024/25 onwards. In anticipation, the stock market will be inclined to allow these prospects to flow into the share price development, even if the high investments and capital outflows (invest in production in the USA, in Europe and in China as well as stakes in for example Forsee Power) cause logical losses. Keep in mind that H2 and FC technology is a new megatrend, which will slowly and then more and more pick up speed and create completely new markets. Whoever lies ahead technologically (for example with competitive products) will be rewarded by the stock market with a good share price performance. Fantastic progressions could always arise as well, in the event that a major corporation like the Adani Group knows how to leverage the currently very low share prices for a stake. All you need is time for the invest to pay off, according to our analysis of all the circumstances. The current prices are clearly buy prices.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
Author: written by Sven Jösting December 12th, 2022
An astounding share price increase – from around 300 to over 520 CHF – we’re seeing for specialist in reciprocating compressors Burckhardt Compression, where I was still calling for rebuys a few months ago after the price slump. This is a company, though, whose shares are in a really narrow market, which is why they should only be viewed as a portfolio addition. However, here it can be seen that many supplier companies and specialist firms are participating in the hydrogen boom.
This development is due to the very good company figures, which have a lot to do with the Swiss company’s products in the environment of the rapidly growing global hydrogen economy. These are impressive numbers: The order volume of over 706.7 million CHF was a formidable 56.8 percent increase from the same period last year. Turnover growth was a good 25 percent in the first half of the year and turnover rose to 335.8 million CHF. Earnings per share even increased by 37.7 percent, to 7.23 CHF.
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Burckhardt Compression has delivered very good figures as well as a perfect outlook. Its systems are necessary for among other things the compression and liquefaction of hydrogen (see p. 24). The current share price has now sufficiently factored in the figures in the company’s valuation. A big cash out might come out of this, with the share price development almost suggesting that the company could also become a candidate for takeover, as many large companies in the world are repositioning themselves and looking for interesting players for a synergistic acquisition.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
Author: written by Sven Jösting December 12th, 2022
Cummins has supplied the company Atura Power with a 20-MW PEM electrolyzer for its Niagara Hydrogen Centre in Niagara Falls, Ontario. The electrolyzer is to go into operation at the beginning of 2024 and produce green hydrogen, for supply to industrial customers, with the help of hydropower. The share price has had good development recently. Cummins is going several ways (engines, fuel cell, electrolysis) in its commitment to hydrogen.
The Indiana-based company with a 100-year history (largest diesel engine producer in the USA) covers many areas of the hydrogen value chain. It deals in PEM as well as in SOFC and alkaline electrolysis, and builds prototypes of H2 engines as well as fuel cell stacks for commercial vehicles, rail vehicles, trucks and construction machines. Here, scaling is proceeding through the construction of large production facilities for ramp-up.
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In addition, Cummins is approaching new markets in hydrogen, like waste-to-value customers. And over 600 projects are in the pipeline. For example, in China, together with Sinopec, it is building large-scale electrolysis capacities to supply 1,000 H2 fueling stations. Clear is that the costs for production need to go down, which however will come with scaling.
Summary: The stock market has driven the price of Cummins share sharply upwards, which is surely due to the orientation toward FC/H2 markets. Perhaps Cummins will promote further growth of the corporation in this area through strategic acquisitions, which would be seen as very sensible. In terms of valuation, the company is very well positioned – in direct comparison to Chinese company Weichai Power. Maybe it should take the price gain and reinvest it in China, since there too hydrogen and fuel cells are setting off.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
Author: written by Sven Jösting December 12th, 2022
“We are working diligently through our filings to target the Nasdaq deadline of 2/13/2023. We look forward to updating the investor community in due course” was the statement from Hyzon. This presumably means that Nasdaq has accommodated the company’s schedule by giving this deadline and with it given Hyzon Motors time to provide clarity. Prior to this was an investigation that had uncovered accounting irregularities, which made a complete reevaluation of the company’s figures necessary. In the course of the audits, the CEO had to vacate his post immediately, which gives an idea of the scope – we’ve reported.
A positive, however, is that Hyzon again had a presence at trade fairs (at IAA Transportation for example) and has also notified of deliveries of its vehicles. Recently, a truck was sent out to the leading Belgian tank transport company Vervaeke. Hyzon is also advertising job openings, which should be viewed as positive.
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Summary: There’s nothing to do until all the facts are on the table. As the company, before the accounting scandal, had over 400 million USD in liquid assets and over 60 percent of the company is held by insiders (founder, management), we are optimistic about the future, even if it is for sure a highly speculative investment. The calculated stock market value of around 400 million USD includes, as we see it, many negative developments. Nearly 20 million shares have been sold short, which will have little impact on the share price in the event of positive news, even if short sellers certainly have a major influence on the price development and price fluctuations.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
Author: written by Sven Jösting December 12th, 2022
Nikola has lowered its targets for year 2022: Instead of 300 to 500 battery-electric trucks in 2022, it will now be 120 to 170 units in the fourth quarter, so the total number will be well under 300. The reason: Nikola wants to slow down production in order to get a better grasp on the cost structure of the company. The reduction of staff in the battery-electric area by up to seven percent was not expected this way, but will also see a turnaround again when capacities reach 20,000 units on an annual basis in 2023/24 and many a new order is in place.
The takeover that took place of Romeo Power will cost money in the integration phase until the cost reduction potentials really take effect. I expected nothing else, as this new subsidiary and its production lines must first be integrated before very positive effects – we’re talking about cost reduction potentials of up to 90 percent – can be observed.
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The future lies in FCEV-Tre
Unchanged are the plans for the production of the hydrogen-powered FCEV-Tre, which will go into production starting the second half of 2023. Test series are already underway with the battery- as well as hydrogen-powered models with companies like Anheuser-Busch and Walmart. Regarding the last named, Nikola has purchased land nearby for 16.5 million USD in order to install a hydrogen infrastructure. Vision: Orders are coming here, or why else this proximity?
Impressive was the presentation by Nikola Motors together with the European Group Iveco at IAA Transportation. The North American company is far ahead of the competition. After all, deliveries will take place in the second half of 2023, while many competitors still need a few years in this.
Liquidity is available but needs to increase
So far, Nikola Motors has been financing the construction of the production facility in Arizona and the invest in hydrogen (production plants, H2 fueling stations) primarily with its own capital – through the issuance of shares. The equity on September 30, 2022 amounted to 403.8 million USD plus a financing commitment of 312.5 million USD from the venture financier Tumin that can be redeemed via the issuance of further shares. At the currently very low share prices, however, the latter makes little sense.
The current ATM program (sale/placement via the stock exchange) of 400 million USD is being made use of, with about 100 million USD in offerings sold. Here, however, it is problematic that nowhere is there a mention of a minimum price per share and therefore Citicorp, as the commissioned bank, can place shares on the market at “any” price. For the short sellers – it’s been already over 100 million shares sold short (status 2022/10/31) – this is of course an easy score, as the impression has been given that Nikola would want to sell shares at any price, without taking into account the dilution effects.
The establishment of the necessary infrastructure for hydrogen is underway. By the end of 2026, the company is to be operating 50 to 60 H2 fueling stations. Nikola has placed special emphasis on this, especially since it can be assumed that not only its own FC trucks will drive there for refueling, but in the future also the hydrogen-powered trucks of competitors. Nikola only has to ensure that it keeps the hydrogen available in the right quantity and at the right price, and produces it itself as far as possible.
Primarily with the consumable hydrogen Nikola wants to make money. There’s even talk of a target amount of 300 tonnes H2 per day by 2026, which alone could correspond to a turnover of over 300 million USD. In 2022, the production volume of hydrogen should be at 30 tonnes per day, which should rise to 150 tonnes per day by 2024. With KeyState Natural Gas, a deal was recently closed for the delivery of 100 tonnes per day starting 2026. With this, 2,500 Nikola Tre-FCEVs could be refueled daily.
Nikola putting itself in Walmart’s radius
For 16.5 million USD, Nikola recently acquired an area of land in Buckeye, Arizona. They named the spot Phoenix Hydrogen Hub LLC, which makes it plain that hydrogen will be produced there or made available via fueling stations and possibly even a service center for FCEV trucks will appear. The attraction is that Walmart has a very large shipping center right there (Walmart alone has 12,000 truck drivers and owns over 80,000 trailers). The proximity to Walmart allows the assumption that it could become a major buyer of hydrogen-powered trucks. The distance from Nikola’s acquired ground to Walmart is no more than 20 miles (32 kilometers), or about a 20-minute drive. Guess why?
Andrew Vesey becomes a member of the board of directors
Andrew Vesey was until now president and CEO of Fortescue Future Industries North America, the company of Australian billionaire Andrew Forrest. Fortescue is also very closely tied to Plug Power through joint electrolysis activities. Before that, Vesey was president and CEO of Pacific Gas & Electric and CEO of the AES Corporation in addition to his role with various other clients as a consultant.
New head of sales: Bruce Kurtt
A heavyweight in the North American truck industry, Bruce Kurtt, has newly joined the management of Nikola and is responsible for sales and service. He has held various top positions in the industry over the past 30 years, at Volvo, Mack, Kenworth and Navistar for example. In addition, he was a truck dealer with his own company and therefore knows the industry like the back of his hand. He said, “I joined Nikola for one important reason: they are ready now. Nikola can deliver BEV trucks right away and FCEV trucks next year. I believe we are ahead of every other OEM with sustainable products that are critical for our future.”
Outlook
The company figures were in the realm of expectations: In the third quarter, turnover amounted to 24.2 million USD, which is linked to the delivery of 63 battery-electric Tre-BEVs and a charging station (MCT). In the second quarter, Nikola delivered 48 e-trucks and 4 MCTs. The loss was 263.2 million USD, or minus 0.54 USD per share by GAAP accounting and minus 0.28 USD per share non-GAAP – in the area of expectations. Since the construction of the charging infrastructure for the trucks has been delayed (approval process, installation, electricity procurement, etc.), Nikola will for now lose speed in the production set-up, especially since losses per vehicle are currently still high and will remain so until this changes in the course of 2023, when the production lines for the batteries (Proterra and Romeo Power – post-acquisition integration) and the FC stacks (Bosch) are running and costs can dramatically decrease. This is, however, normal in early-stage adoption of a technology, it was said.
Clear rejection of the SUV-excavator: Rumors were floating that Nikola wanted to build this now after all. However, they’re fully concentrating on emissions-free, so battery-electric and hydrogen-powered, trucks. The ambitious targets for the production build-up – about 20,000 units of each of the two models by 2023 – have now been postponed for year 2024 and with that will require about 345 million USD less in capital. At any rate, the capacity of 20,000 units and then 40,000 one year later are only numbers in the sidelines and are far removed from current sales expectations, so this shifting of targets has no current effect.
The test series with companies such as TTSI (for Anheuser-Busch) are running very well for both models – already 9,700 miles (15,610 km) in daily operation for Anheuser-Busch, and 5,500 miles with the battery-electric vehicles and 2,700 miles with the hydrogen-powered vehicles for Walmart. In this year, 17 beta versions in total of the FCEV-Tre will have been delivered – for test trials. The costs for getting the imported components – by ship again instead of as air freight – were able to be significantly reduced in the third quarter from 84 percent to 33 percent. The supply chains too were able to be improved. And then recently came in an order from Zeem Solutions for 100 BEV-Tre units – a good sign.
Very positive should be valued the partnership with Iveco, as they are also providing the dealership network in Europe for the JV, where every 100 km (before it was 150 km) an H2 fueling station is to appear by 2028. For this, Nikola is also working with E.ON. Additionally, Nikola recently signed a partnership agreement with ChargePoint Holdings (one of the world’s largest charging station providers, whose network is larger than that of Tesla) in order to ensure a supply of electricity for the BEV-Tre – a basic prerequisite for the sale of these trucks.
Plug Power and Nikola Motors announced shortly before the editorial deadline that Plug wants to buy up to 75 of the hydrogen-powered trucks of the brand Tre FCEV within the next three years. The two companies want to deal in hydrogen in parallel. Plug will supply the system for hydrogen liquefaction for Nikola’s project in Buckeye, which is to initially produce 30 and later up to 150 tonnes of hydrogen per day. In addition, the tanks for Nikola’s transport trailers are to be supplied by Plug. We will see several more such joint ventures in 2023.
Short sellers dominate stock market trading
The short sellers in Nikola are very actively involved in daily stock market trading. Nikola unfortunately has also – surely unintentionally – set up things to make these easy (guidance and at-the-market program). Last but not least, it was published that ex-CEO Mark Russell according to a tax-motivated selling plan is allowing options to be converted to shares in the equivalent value (we’re talking 75,000 shares per trading day) via their sale. The total value with Russell may be (relatively) small (currently probably 5 million USD), but it of course does not look good when a top manager – for whatever reason – sells shares. He meanwhile still holds, directly or indirectly, over 45 million shares, so all needs to be seen in relation.
1.3 billion USD in credit from the DOE?
An application has been submitted and is already in the second approval stage. Under the US Inflation Reduction Act, capital funds may be requested if they support the ramp-up of the hydrogen economy. Since Nikola itself is entering the hydrogen production and distribution field to strengthen the basis for H2 truck sales, this credit – if it can get it – would be useful. If granted, Nikola would have new and very important liquidity for the expansion of H2 activities. Unfortunately, nothing could be said on how long the approval and award process takes and what amount Nikola will get to fall back on. In any case, a very positive bit of news, especially since the US government is exerting a lot of positive pressure here and wants to see the funds in actual use.
Summary
For Nikola, time is needed, as the company has to restructure its liquidity situation. The truck manufacturer is a positive frontrunner in battery-electric as well as hydrogen-powered trucks. The real ramp-up will be seen in 2023, when I expect some (large) orders, as more and more shipping companies want to reestablish themselves in this area and also have to do so due to emissions restrictions. Nikola covers both areas, where in my opinion the much more exciting one – also because more money is earned with it – is hydrogen.
Short sellers still have a significant influence, but this will disappear in 2023 when Nikola delivers what is planned in the next year. That all this is taking longer than originally thought is in the nature of the business of a startup. Wonders could happen if Iveco increases its stake. Or if orders are received. Because the stock market is over 50 percent expectation (André Kostolany).
We’re seeing here the establishing of a first mover in hydrogen within the commercial vehicle sector who is clearly ahead of the big players in the industry in terms of time. With a stock market valuation of 1.2 billion USD, the stock market is massively exaggerating downwards, is my subjective view of things. Highly speculative, but with very high potential at the same time. Look at Nikola Motors as one possibility to invest in hydrogen in commercial vehicle transport at the stock exchange.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
Author: written by Sven Jösting December 12th, 2022
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