Electric-vehicle startups set to extend blistering rally

Nu Ride

16/06/2023 11:52

June 16 (Reuters) - Electric-vehicle startups from
Nikola  NKLA.O  to Lordstown Motors  RIDE.O  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  WKHS.O  have short interests of 15.2% and 24.3%,
respectively.
    Used-car retailer Carvana  CVNA.N , 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  TSLA.O , 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  FFIE.O , an EV startup with a
value of just over $500 million, were also among the top 20
stocks traded by retail investors.
    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  2317.TW , 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)
 ((Aditya.Soni@thomsonreuters.com; +91 80 6749 1130))