Elon Musk….take a seat.
VectoIQ Acquisition Corp. (VTIQ), announced this morning that they have entered into a definitive agreement to create a company focused on the development of next generation smart transportation. Upon the closing of the transaction, the combined company will be named Nikola Corporation and is expected to remain NASDAQ-listed under the new ticker symbol “NKLA.”
Nikola is a global leader in zero emissions heavy duty trucks and hydrogen infrastructure. More than $10 billion in pre-order leases to date and the joint venture with European industrial vehicle manufacturer IVECO make Nikola a formidable competitor to other OEMs (original equipment manufacturers). Nikola’s business model uniquely supplies both the truck and hydrogen fueling infrastructure, solving the fleets’ concerns of where to refuel with green hydrogen at competitive pricing to diesel. The transaction proceeds will accelerate production, allow Nikola to break ground on its state-of-the-art manufacturing facility in Coolidge, Arizona, and begin its hydrogen station infrastructure roll out. The company expects to generate revenue by 2021 with the roll out of its BEV truck, followed by FCEV truck sales starting in 2023 and the initial build out of hydrogen fueling stations to serve Nikola customers’ fleets, such as Anheuser-Busch.
Trevor Milton, Founder and CEO of Nikola, will serve as Executive Chairman of the combined company. Prior to launching Nikola in 2015, Mr. Milton served as CEO of dHybrid Systems, a natural gas storage technology company. Additionally, Mark Russell, who has more than 20 years of experience building and managing companies in the manufacturing industry, will serve as the CEO of Nikola. He joined Nikola as President in 2019 and previously served as President and COO of Worthington Industries, a publicly-listed metals manufacturing company.
Kim Brady, currently the CFO at Nikola, will continue in that role post-close. Mr. Brady has more than 20 years of experience in private equity and investment banking. Prior to joining Nikola, Mr. Brady served as Senior Managing Director at Solic Capital, as well as CFO and General Manager at various companies in the manufacturing, business services and healthcare sectors.
The transaction reflects an implied enterprise value at closing of $3.3 billion. Cash proceeds raised in connection with the transaction, which will primarily be used to fund operations, support growth and for other general corporate purposes, will be funded through a combination of VectoIQ’s cash in trust and a $525 million private placement of common stock at $10.00 per share led by institutional investors including Fidelity Management & Research Company, ValueAct Spring Fund and P. Schoenfeld Asset Management LP. Current Nikola stockholders will remain majority owners of the combined company at closing.
The transaction is structured as a reverse triangular merger, which includes the following:
- On the Closing Date, Merger Sub, a newly formed, wholly-owned direct subsidiary of VectoIQ, will be merged with and into the Company, with the Company surviving the Merger as a wholly-owned direct subsidiary of VectoIQ;
- Certain investors have entered into certain subscription agreements, pursuant to which such investors will purchase shares of VectoIQ Common Stock at a purchase price of $10.00 per share in a private placement to be consummated immediately prior to the consummation of the Proposed Transactions;
- In addition, concurrently with the execution of the Business Combination Agreement, VectoIQ, the Company and the Key Company Stockholders entered into a Stockholder Support Agreement, pursuant to which such Key Company Stockholders agreed to vote their shares of Company Common Stock and Company Preferred Stock in favor of the Business Combination Agreement and the Proposed Transactions; and
- In connection with the Closing, VectoIQ, certain stockholders of the Company and certain stockholders of VectoIQ will also enter into a registration rights and lock-up agreement.
Quick takes: This is one very cool company. Admittedly, I know less than nothing about hydrogen fuel cells, but the presentation makes a very compelling story. In particular, this slide:
Hold up…you mean, you can can get zero emissions, the same fueling time as diesel, and the same range, which is more than twice as much as electric AND you create hydrogen fuel by running a current through water?? Sold. In all seriousness, you need someone with better technical know-how on this technology to weigh-in, but it begs the question…why have we been wasting time with batteries? (side-eyeing Musk).
However, just like Virgin Galactic, Nikola’s story is very reminiscent of Tesla’s. It’s early stage, no revenue yet, but a very, very compelling story that promises a better future. Emphasis on the word “story” since, again, there is no revenue for this company. But if this company can deliver, the same way Tesla has, and you missed out on investing in Tesla at the early stage, this combination could be very promising. The only question mark is, why not cars too? There are currently hydrogen cars makers out there – The Toyota Mirai, the Honda Clarity Fuel Cell, and the Hyundai NEXO – so is this something Nikola has planned for the future?
Lastly, to further hammer home the point that this could be the next Tesla, “Nikola” is the first name of Nikola Tesla, the inventor of the Tesla Coil, which is used to produce high-voltage, low-current, high frequency alternating-current electricity.
- Cowen is serving as financial and capital markets advisor
- Greenberg Traurig, LLP is serving as legal advisor to VectoIQ.
- Morgan Stanley is serving as financial advisor.
- Pillsbury Winthrop Shaw Pittman LLP is serving as legal advisor to Nikola.