Electric-vehicle startups set to extend blistering rally
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[June 16, 2023] (Reuters)
- Electric-vehicle startups from Nikola to Lordstown Motors were set on
Friday to extend a blistering rally in their shares that has put the
cash-strapped companies on track for hefty weekly gains.
The winning streak has come without any apparent news or catalyst for
the companies, leading several analysts and traders to point to a
potential squeeze in the highly shorted stocks.
For instance Nikola, which has more than doubled in value this week, has
a short interest of 15.7%, according to Refinitiv. Other big gainers
such as Lordstown and Workhorse Group have short interests of 15.2% and
24.3%, respectively.
Used-car retailer Carvana, another highly shorted stock, has also posted
strong gains that have pushed up its value by nearly $1.38 billion this
week. The EV startups, meanwhile, have added over $500 million to their
collective market value.
The rally has coincided with a record winning streak at Tesla, the EV
market leader whose stock movement often influences other companies in
the sector.
RETAIL INTEREST
The surge in shares has also seen strong support from retail investors,
with Nikola the fifth most traded U.S. stock by retail investors on
Thursday, according to the J.P. Morgan retail flows tracker.
Carvana and Faraday Future, an EV startup with a value of just over $500
million, were also among the top 20 stocks traded by retail investors.
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Lordstown's logo is pictured on a
smartphone in this illustration taken, December 4, 2021.
REUTERS/Dado Ruvic/Illustration/File Photo
The surge could help Nikola overcome the risk of being delisted. The
company late in May received a notice from Nasdaq as its share price
had been below the $1 minimum level for the past 30 days.
Nikola shares were 20% higher before the bell on Friday at $1.65, on
course to stay above the minimum level for the third straight
session. The stock will regain compliance with Nasdaq's norms if it
trades above $1 for 10 consecutive business days.
Nikola's stock has a 12-month forward price-to-sales ratio of 3.21,
compared with Workhorse's 1.38 and Tesla's 7.23.
Still, many challenges remain for the EV startups, evidenced by the
year-to-date stock price declines of 35% and 75% seen at Nikola and
Lordstown, respectively.
Rising interest rates and high levels of inflation have limited
their access to funding at a time when efforts to ramp up production
are thinning the companies' cash reserves.
Lordstown is also stuck in a bitter dispute with investor Foxconn,
which has threatened to scrap a crucial $170 million funding for the
EV maker.
(Reporting by Aditya Soni and Akash Sriram in Bengaluru; Editing by
Shounak Dasgupta)
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