Tesla’s New Competitor Nikola Corp Seems Ripe to Deliver Disappointment
Ford Motors was founded in 1903 and has manufactured well over 350 million cars. And yet, Ford’s market capitalization was just eclipsed by a company that has yet to produce a single product or even purchase a factory.
New kid on the block Nikola Corporation (Ticker: NKLA) debuted on the Nasdaq on June 4th at a price of $37.55. Today the stock closed at $79.73, representing a remarkable 112 percent gain over its debut price less than one week ago.
Curious what a 112 percent gain looks like? It looks something like this:
Nikola’s surge can only be explained by the outsized promises of its founder, Trevor Milton.
Milton has been quite outspoken about the fact that he thinks he’s pretty hot stuff. In a recent interview, Milton even threw down the gauntlet against competitor Elon Musk:
“There’s very few people that can out-Elon in this world and I’m one of them. Nikola is the pioneer in heavy-duty trucking and Tesla’s just really following in our footsteps.”
Bold words from someone who has yet to make a single vehicle. But hey, fortune favors the bold, right?
Milton’s words are reminiscent of the promises of other founders like Elizabeth Holmes, famous for her obsession with Steve Jobs and her penchant for big promises. Oh yeah, and for her fraudulent actions while helming the medical device company Theranos.
So far, Nikola has only proven that they know how to build trucks in CAD software. They haven’t pushed anything through a real-world production line.
Nikola plans for its first electric-powered semi-truck to hit the market in 2021. Before then, they’ll likely have to surmount some incredible manufacturing challenges — at least if Tesla’s history has anything to say about it.
When Elon Musk and Tesla began taking pre-orders for their electric vehicles, they ran into more nightmares than a 10-year-old after watching a horror flick. Production delays pushed back release dates for months, then years. And that was for a company that was backed by an established founder with seemingly limitless resources and undying fans.
Company valuations are a mystical science, and it seems the world increasingly favors the wishful potential to make money over the proven capability of making money.
Take Airbnb reaching the combined valuation of Hilton plus Hyatt. Or WeWork hitting a valuation that was more than 10 times that of IWG (the parent company of established co-working companies like Regus and Spaces).
So why should it be surprising for a company with no physical cars to be worth more than Ford Motors?
The stock market is just a house of cards anyway, right?
Note: The author holds no position in any of the stocks mentioned in this article.