Nikola Corp (NASDAQ:NKLA) dropped more than 13% in Monday’s early deals after the EV truck firm revealed a US$325 million bond deal that threatens an ‘overhang’ in the stock as well as future dilution, as debt is swapped for equity.
It announced in a filing that it will sell the convertible bonds through a direct offering, and, the funding would come in tranches. The initial tranche is for US$124.5 million of principal. The bonds will carry interest at 5%.
Nikola earlier this month declared a vehicle recall, affecting 209 units, and temporarily halted certain production as it continues to investigate problems with its batteries.
Nikola, meanwhile, warned investors its 'brand, business, results of operations, financial condition and cash flows may be adversely affected' alongside the filing.
“We may incur significant expenses as a result of these events and there can be no assurance as to when we will be able to resume production of our BEV trucks,” the company said.
In New York, Nikola stock was down 25 cents or 12.76% trading at US$1.71 per share.