Nkla reverse split

Nikola Corporation's reverse stock split is a corporate action aimed at increasing the price per share and avoiding delisting from Nasdaq. Here's a detailed analysis of the event:

1. Reverse Stock Split Mechanics: Nikola Corporation is implementing a 1-for-30 reverse stock split, which means that every 30 shares of Nikola's common stock will automatically convert into one share of common stock. This results in a significant increase in the price per share, as the number of shares outstanding is reduced by a factor of 30.
2. Impact on Shareholders: Shareholders holding 30 shares before the reverse stock split will end up with one share after the split becomes effective. Those holding 32 shares, for example, would receive one share and some fractional shares, which are being handled by receiving a cash payment in lieu.
3. Effective Date and Trading: The reverse stock split is scheduled to be effective as of June 24, 2024, at 4:01 p.m. Eastern Standard Time. Nikola's common stock is expected to begin trading on a split-adjusted basis on June 25, 2024.
4. Market Reaction and Challenges: Nikola's stock experienced a significant plunge of 16.5% to $8.78 on June 25, 2024, following the failed-to-occur reverse split as reported by EV. This represents an all-time low when factoring in the split-adjusted price. Despite recovering some of the lost returns, Nikola's market capitalization remains low at $424 million, and the company faces fundamental headwinds.
5. Financial Considerations: Nikola's decision to undertake a reverse stock split is driven, in part, by the need to comply with Nasdaq listing rules. The number of authorized shares will be reduced from 1.6 billion to 1 billion after the split. At the time of the announcement, Nikola's market capitalization was approximately $652 million, and the company had 1.36 billion shares outstanding.

In conclusion, Nikola's reverse stock split was intended to improve its stock price and address potential delisting concerns. However, the market's reaction and the ongoing challenges faced by the company indicate that the move may not have been sufficient to mitigate these issues in the long term.