A hydrogen-electric Nikola semi-truck hauls a load of Budweiser through St. Louis in November 2019.
Nikola, an Arizona startup developing futuristic semi-trucks powered by hydrogen fuel cells and batteries, is listing shares on Nasdaq in an unusual merger with publicly traded acquisition firm VectoIQ that the companies say is worth $3.3 billion and will bring in funds to accelerate the construction of Nikola’s first factory.
Upon completion of the merger, VectoIQ’s Nasdaq ticker of VTIQ will change to NKLA, the companies said. Proceeds from the transaction are to be used mainly to fund Nikola’s operations and growth and come through a combination of VectoIQ’s cash in trust and a $525 million private placement of common stock at $10 per share, a move led by Fidelity, ValueAct Spring Fund and P. Schoenfeld Asset Management. The merger should be done in the second quarter, pending SEC approval, the companies said.
Shares of VectoIQ, a special purpose acquisition company, or SPAC, created by former General Motors Vice Chairman Steve Girsky focused on high-tech transportation companies, jumped on the news, rising more than 11% in Nasdaq trading Tuesday to $11.50.
“The additional capital from blue-chip investors is a sign investors in believe the future of our business,” Trevor Milton, Nikola’s founder and CEO, said in a conference call. “I founded the company to completely disrupt the energy and transportation market.”
A potential competitor to Elon Musk’s Tesla in the electric truck market, Nikola has raised about $600 million to get its hydrogen semis into production at a plant in Coolidge, Arizona, gaining a $3 billion valuation prior to the VectoIQ merger. But it needs considerably more funding to get its Badger fuel cell pickup to market and also build its own network of hydrogen fuel and battery charging stations to power its vehicles. Listing shares via VectoIQ may generate funds quickly and doing it via a company that’s already trading on Nasdaq is likely cheaper than through a conventional IPO.
Nikola's hydrogen fuel-cell Badger pickup will be built by an unnamed automaker.
(For more on Nikola and Trevor Milton, see “Behind New Billionaire Trevor Milton’s $3 Billion Push To Make America Run On Hydrogen” from the September 30, 2019 issue of Forbes magazine.)
The listing and additional fundraising should ultimately raise about $1 billion for Nikola, Milton tells Forbes. The motivation for merging and getting shares on Nasdaq via VectoIQ was mainly about speed, he says, estimating Nikola saved at least six months relative to a conventional public listing.
“That was a huge thing for us because the market has never been stronger and they've never rewarded companies like ours more than now,” he says. “It was really important that we hit the market fast.”
The deal “is an example of how a SPAC, coupled with a strong pipe, can be used as an alternative to a traditional IPO,” said Alan Annex, co-chair of Greenberg Traurig’s Global Corporate Practice, who led the firm team that served as legal advisor to VectoIQ. “It’s faster and gives the target more control over the valuation.”
Prior to announcement, Forbes estimated that Milton was the first hydrogen truck billionaire owing to his stake of more than 40% in Nikola. After the completion of the merger, Milton expects to retain more than a 30% ownership stake, according to the company.
To date, Nikola has racked up orders for about 14,000 electric trucks that represent $10 billion of future revenue–if they are all built and delivered. Nikola’s business model is based on seven-year leases to shippers, such as beermaker Anheuser-Busch, that include the cost of fuel. Initially, it will start delivery of shorter-range, battery-only trucks in 2021, built in Europe with partner Iveco. That will be followed by longer-range Nikola semis running on electricity produced from hydrogen that should arrive in late 2021.
Nikola CEO Trevor Milton at the company's Phoenix headquarters.
Electric trucks have been a dynamic space in recent years, ranging from Musk’s plans for a Tesla Semi and Cybertruck pickup; Rivian’s plans for electric pickups, SUVs and delivery vans for Amazon; U.K. startup Arrival’s low-cost delivery trucks for UPS; and battery-busmaker Proterra’s plans to supply components for electric, heavy-duty Freightliner delivery vehicles.
Similar to Nikola’s production partnership with Iveco, which will build its electric trucks for the European market, Milton says the Badger pickup will be produced for it by an automaker he declined to identify. The company also plans to sell battery-powered all-terrain vehicles, including a version modified for military use, and electric personal watercraft.
“In our two-year quest to find a partner that was a proven technology leader and focused on making a global difference, Nikola was the clear winner,” VectoIQ CEO Girsky said. “Nikola’s vision of a zero-emission future and ability to execute were key drivers in our decision.”
Milton will become executive chairman of the new company, while Nikola President Mark Russell will become CEO. Nikola CFO Kim Brady will retain that role and Girsky will join Nikola’s board. The boards of VectoIQ and Nikola have unanimously approved the deal.
Along with Iveco, Milton’s closely held company is working with industrial partners, including Bosch, Meritor, South Korea’s Hanwha and Norway’s Nel, to build sci-fi-styled semi-trucks powered by batteries and hydrogen fuel cells, a technology that produces electricity on demand in a chemical reaction producing only water as a byproduct. Nikola is to start initial commercial production of its semis in late 2021 and is also planning to build a network of large-scale hydrogen fuel stations across the U.S. And while most hydrogen is made from natural gas, Nikola intends to produce its fuel from water and renewable electric power to reduce total carbon emissions.
Nikola plans to build a network of highway-adjacent fuel stations dispensing hydrogen that it makes ... [+]
