Author Topic: NKLA - Nikola  (Read 13132 times)

Sunrider

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NKLA - Nikola
« on: June 09, 2020, 12:37:25 PM »
... I know there's already a thread on the general board, but since this is about an actual trade, I thought I'd open one here.

I notice that this has been bid up tremendously - I have no view on the product, just the price move seems excessive. The company has warrants outstanding. From the latest Q:

"The Company may call the Public Warrants for redemption:
 
∑   in whole and not in part;
∑   at a price of $0.01 per warrant;
∑   upon a minimum of 30 daysí prior written notice of redemption; and
∑   if, and only if, the last reported closing price of the ordinary shares equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders."

Unless I'm daft, this would seem to indicate that the warrants should only ever be worth a maximum of $6.5, given that it is in the interest of the company to redeem them for a penny when the price is above the threshold for long enough (rather than having people exercise them and having to issue them shares at $11.50). Given that there are 23m warrants and ca. 60m shares o/s, it would seem the company should want to avoid that dilution.

On that basis, wouldn't the warrants here be a much better short than the common, or am I totally misunderstanding either the company's incentives or the warrants redemption would work? (Note also, the company has not yet filed a registration statement so the warrants cannot be exercised currently.)

Edit: I suppose the 30 days notice periods complicates things somewhat in that, provided a registration statement has been filed, one can exercise and the warrants should thus trade up to the difference between current strike and price. If not registration statement has been filed one can still exercise cashless ... so on that basis they still have more value than the $6.5, and I have to correct the above.

On this basis, this would be a bet on either the stock price falling to make the warrants worth less than the current ca. $31.

Thank you!
« Last Edit: June 09, 2020, 01:43:36 PM by Parsad »


Sunrider

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Re: NKLA - Nikola (Short)
« Reply #1 on: June 09, 2020, 12:49:01 PM »
Instead of a re-edit:

Given "No Public Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of Common Stock issuable upon exercise of the Public Warrants and a current prospectus relating to such shares. Notwithstanding the foregoing, if a registration statement covering the issuance of the shares issuable upon exercise of the Public Warrants is not effective within 90 days from the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement or a current prospectus, exercise Public Warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. If an exemption from registration is not available, holders will not be able to exercise their Public Warrants on a cashless basis."

... would it be possible for the company to give a redemption notice in ca. 16 days or so (20/30 days > 18), then redeem at $0.01 30 days after that, and nobody ever had the chance to exercise cashless or otherwise (provided company does not file/get an effective registration statement over that period)?

hmm ...

Jurgis

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Re: NKLA - Nikola
« Reply #2 on: June 09, 2020, 01:48:46 PM »
Sold half of my beer-sized VTIQW/NKLAW position today. Now it can go up another 10x.
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rb

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Re: NKLA - Nikola
« Reply #3 on: June 09, 2020, 04:46:46 PM »
Are we really doing this? Ok then.

There's no way i would short this. You could do it for non-economic amounts for shits and giggles. But if you want to do it for real I would look to see if there are any idiots out there willing to sell you long term puts. I haven't looked at it, but my guess is that there aren't.

jalebijim

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Re: NKLA - Nikola
« Reply #4 on: June 09, 2020, 06:42:48 PM »
Are we really doing this? Ok then.

There's no way i would short this. You could do it for non-economic amounts for shits and giggles. But if you want to do it for real I would look to see if there are any idiots out there willing to sell you long term puts. I haven't looked at it, but my guess is that there aren't.


I naked shorted some deep in the money calls, nothing big(just for entertainment).

As they say on reddit WSB, YOLO!

Most of the people on this board are seasoned long-term investors and don't realize that there are a lot of bored kids at home who are using their stimulus checks to gamble on Robin Hood. A lot of the small cap liquidity might be coming from that.
« Last Edit: June 09, 2020, 07:04:43 PM by jalebijim »

rb

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Re: NKLA - Nikola
« Reply #5 on: June 09, 2020, 06:44:54 PM »
Are we really doing this? Ok then.

There's no way i would short this. You could do it for non-economic amounts for shits and giggles. But if you want to do it for real I would look to see if there are any idiots out there willing to sell you long term puts. I haven't looked at it, but my guess is that there aren't.


I shorted some naked deep in the money calls, nothing big(just for entertainment).

As they say on reddit WSB, YOLO!
Expiration? Also did you check what the open interest was on that?

jalebijim

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Re: NKLA - Nikola
« Reply #6 on: June 09, 2020, 06:50:58 PM »
Are we really doing this? Ok then.

There's no way i would short this. You could do it for non-economic amounts for shits and giggles. But if you want to do it for real I would look to see if there are any idiots out there willing to sell you long term puts. I haven't looked at it, but my guess is that there aren't.


I shorted some naked deep in the money calls, nothing big(just for entertainment).

As they say on reddit WSB, YOLO!
Expiration? Also did you check what the open interest was on that?


There were no short shares available to borrow and I rarely use options. This is pure speculation/gambling. I went out a few months with deep in the money calls.

Since I am long Tesla in my gambling account it seemed like a good pairs trade.
« Last Edit: June 09, 2020, 06:52:46 PM by jalebijim »

rb

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Re: NKLA - Nikola
« Reply #7 on: June 09, 2020, 06:59:10 PM »
That sucks! That means no puts for rb  :(. It's a shame too cause this thing is one of the easiest things I've ever seen.

jalebijim

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Re: NKLA - Nikola
« Reply #8 on: June 09, 2020, 07:01:37 PM »
That sucks! That means no puts for rb  :(. It's a shame too cause this thing is one of the easiest things I've ever seen.


I have not confirmed this but read the smart money knows this thing is mostly hot air, so the puts are commanding crazy premiums.

jalebijim

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Re: NKLA - Nikola
« Reply #9 on: June 09, 2020, 07:15:05 PM »
It is trading at 136 times projected 2024 EBITDA.  :o

Can't make these things up, truth is stranger than fiction!

Hydrogen tulips FTW!
« Last Edit: June 09, 2020, 07:17:23 PM by jalebijim »