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Tesla's New Rival Explodes Following IPO

Nikola

They are both named after inventor Nikola Tesla. They are both aiming to upend the market of predominantly gasoline and diesel-powered cars and trucks with their zero-emission technologies.   And their stock prices are surging—but for different reasons.  

The day on which Tesla's shares hit an all-time high closing price of $949.92 on Monday on record-high China-made Model 3 sales, shares in competitor Nikola more than doubled since their Friday closing price, hitting $73.27 per share after soaring 104 percent on the third day of trading on the NASDAQ.

Nikola – founded in 2015 and named after the same man that Tesla used for its name – made its debut on the stock market on June 4, after merging with special purpose vehicle company VectoIQ Acquisition Corp. Stephen Girsky, the current CEO of VectoIQ and former Vice Chairman of General Motors, joined Nikola's board of directors.

Nikola is not rivaling Tesla in the passenger car manufacturing business: it's aiming to build battery-electric and hydrogen-electric trucks and pickups. Its long game is in zero-emission heavy-duty transportation and related infrastructure such as hydrogen station networks.

But its new electric pickup truck, Badger, could become a competition of Tesla's Cybertruck. The Badger will have an estimated range of up to 600 miles, which is 100 miles more than the estimated maximum range of Tesla's Cybertruck.

Nikola Share Price Doubles Just Two Days After Market Debut   

On their third trading day since listing on the NASDAQ, shares in Nikola surged by 104 percent, after the company's founder and executive chairman Trevor Milton tweeted that Nikola would open up reservations for the Badger, "the most bad ass zero emission truck" on June 29. The projected retail price of the Badger will be between US$60,000 and US$90,000, depending on the configuration, according to the company.  

Nikola and its founder are betting big that policymakers will support zero-emission technology in road transportation and that investors will see the Environmental, Social, and Governance (ESG) credentials of the company.

"Nikola is thrilled to complete the Nasdaq listing and be part of the ESG investment world. This is a significant endorsement in fuel-cell and battery-electric technology," Milton said in a statement last week when the firm announced its listing.

Related: Copper Glut Continues To Grow So far, so good—the stock market, retail investors, traders, and fans are lapping up Nikola's stock. The market capitalization of the company exceeded on Monday the market caps of two of Detroit's Big Three.

"I've wanted to say this my whole adult life; $NKLA is now worth more than Ford and FCA. Nipping on the heels of GM. It may go up or down and that's life but I'll do my part to be the most accessible and direct executive on Twitter," Milton tweeted after markets closed on Monday.

Surpassing the market capitalization of each of Ford and Fiat Chrysler Automobiles is not bad for a company that has yet to make any revenue.

Revenue Generation Expected Next Year 

Nikola expects to start generating revenue by 2021 with the rollout of its Nikola Tre Class 8 BEV, followed by the Nikola Two Class 8 FCEV coming in 2023.

According to founder Milton, the company will make five times the revenue per truck sold compared to other companies. This will be achieved by vertically integrating the supply chain, Milton told Yahoo Finance in an interview on the day of the stock debut last Thursday.

Jeffrey Ubben, chief executive at Nikola investor ValueAct, said earlier this year that Nikola could be the next US$100-billion company.

Milton told Yahoo Finance last week that "How you get there is because we vertically integrated the entire supply chain. It's very similar to Amazon."

Related: How A Pandemic Made Americans Better Workers

Unlike Tesla, Nikola is not building the technology behind its vehicles in-house. Instead, it has chosen to share the intellectual property on its R&D with technology and engineering companies with deep pockets that can make Nikola's ideas work.

Can Nikola Avoid Tesla's Growing Pains?

Regardless of the different business models, comparisons between the two companies named after Nikola Tesla may be inevitable, not only because they bear the name of the same inventor.  

Going forward, Nikola will have to start generating revenues, preferably sooner rather than later, in order to convince the still sizable camp of skeptics that zero-emission heavy-duty vehicles could give fossil fuel-powered vehicles a run for their money over the next decade.

Delivering on targets and smooth production ramp-up could also spare Nikola some of the growing pains that Tesla had two years ago.

Just like Tesla, there is a lot of shorting on Nikola's stock. On Friday, Nikola's short interest was US$40.51 million, with 1.20 million shares shorted, or 5.89 percent of its float, according to Ihor Dusaniwsky, managing director of financial analytics firm S3 Partners.

The trend in the stock price of Nikola – just three days into trading on the market – is impossible to predict, but so far, it shows the company may have already built a devoted group of followers and believers, just like Tesla has done.

By Tsvetana Paraskova for Oilprice.com 

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