Delaware Gov. John Carney has signed legislation that clears the way for Nikola Corp. to double its number of outstanding shares. That will enable the electric truck maker to sell shares to pay interest on debt and support the launch of its hydrogen-powered fuel cell trucks.
The doubling of authorized shares from 800 million to 1.6 billion twice failed to receive enough shareholder proxies, leading to two adjournments of Nikola’s virtual annual meeting. The next count will take place Aug. 3, but the outcome of the vote is irrelevant.
Before the rule change in the state where Nikola is incorporated, the share increase needed to receive a majority, or about 400 million proxies, equal to 50% plus one of all outstanding shares.
The new regulation requires only a majority of shares voting on the proposal. Nikola said it already has sufficient votes for the increase by counting that way. It was included in a package of changes that passed in both chambers of the Delaware Legislature.
Shareholders have seen Nikola’s price rise significantly in recent weeks — including 61% last Thursday. They face dilution of their holdings as Nikola registers the shares for sale. The increased number of shares makes existing shares less valuable. Shares (NASDAQ: NKLA) traded intraday Wednesday at $2.65 compared to a low of 54 cents as recently as June 6.
Milton votes thumbs down
Founder and former Executive Chairman Trevor Milton broke a nearly three-year silence on social media to urge shareholders to vote against the measure or change their votes if they previously voted in favor. Milton, who faces sentencing on three federal fraud convictions on Sept. 22, owns about 8% of Nikola shares, less than a third of his onetime holdings.
Nikola needs money to pay overdue interest on a $200 million loan it received from hedge fund Antara Capital in 2022. Antara required Nikola to seek the higher share authorization if it could not service the debt.
The company is also nearing the end of arbitration with Milton over getting the former chairman to reimburse Niloka for a $125 million fine the company agreed to pay to the Securities and Exchange Commission related to Milton’s false claims about Nikola’s technology accomplishments and prowess.
Nikola reports second-quarter earnings on Aug. 4.
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