Nikola's Stock Surges On New Deals And Rising Short Interest

Key Points

• After announcing two large deals for hydrogen fuel cell vehicles, Nikola's stock surged 60.87% yesterday.
• Short interest in NKLA has been growing, with nearly 129 million shares sold short as of June 30.
• Caution should be exercised when considering an investment in Nikola, as the surge appears to be driven by speculative trading rather than solid investment fundamentals.

Shares of Nikola NASDAQ: NKLA are rocketing after the company announced two large deals for its hydrogen fuel cell vehicles. Shares of NKLA soared 60.87% yesterday off the back of the positive news and now find themselves in positive territory on the year, up close to 3%. The stock is up over 100% in the last month thanks to positive catalysts and growing short interest.

Nikola Announced Two Large Deals

The First Deal: BayoTech, a small-scale hydrogen producer, has entered into a supply agreement with Nikola's HYLA division. HYLA focuses on hydrogen distribution and dispensing solutions for commercial trucking applications that utilize hydrogen fuel-cell technology.

As part of this agreement, BayoTech has committed to buying 50 Nikola Class 8 hydrogen fuel cell trucks within the next five years. The first batch of twelve trucks will be delivered between 2023 and 2024. 

Additionally, in connection with the HYLA partnership, Nikola will acquire up to 10 of BayoTech's HyFill hydrogen transport trailers. These trailers are essential for transporting high-pressure hydrogen from production sites to refueling stations.

The Second Deal: During Bosch's Tech Day 2023 event held in Stuttgart, the supplier of Nikola announced that it would commence large-scale production of its fuel-cell power modules. Bosch has chosen Nikola to be its pilot customer as part of this initiative.

The fuel cells manufactured by Bosch will be integrated into Nikola's Class 8 truck, which is set to be delivered to customers in North America starting in the third quarter of this year.

Growing Short Interest Has Fueled The Move

Month over month, the short interest has grown significantly in NKLA. As of June 30, almost 129 million shares were sold short, up from 115 million on June 15. I suspect that figure to rise considerably when the latest short data is released on June 15.

With an enormous surge in trading volume and considerable momentum and range in the stock, the significant and growing short interest might become the clear catalyst and motivation for higher prices, albeit short-lived.

The recent increase in buying pressure, driven by short sellers rushing to close their positions, has caused and will continue to cause an imbalance between supply and demand. Consequently, the company's share price is experiencing a significant and rapid increase.

Should You Invest In NKLA?

Caution should be exercised when considering an investment in Nikola. The company's cash burn remains a concern, with a modest cash balance and limited insider buying activity over the previous twelve months. The recent rally appears driven by speculative trading rather than solid investment fundamentals. Therefore, NKLA seems to be a trading vehicle, not an investment vehicle.