You can thank the SPAC (Special Purpose Acquisition Company) process for that. Nikola basically bypassed all of the normal scrutiny that's associated with an IPO by merging with a placeholder company that had already gone public. It's a really shady practice, and Nikola is a perfect example of what's wrong with it.
An amusing example of this: a pharma startup wanted to sell shares to raise money for drug development, so they bought a tiny Las Vegas concession vendor called Fun City Popcorn that was already public and then merged with them:
https://sec.report/Document/0001144204-05-032459/
> An amusing example of this: a pharma startup wanted to sell shares to raise money for drug development, so they bought a tiny Las Vegas concession vendor called Fun City Popcorn that was already public and then merged with them
This is a reverse merger. SPACs, or blank-cheque companies, involve a reverse merger. But they’re a specialised case of them.
Yeah - I don’t see how SPACs are anything more than a way to dump a losing company on the public.
Supposedly it’s about giving founders certainty, but if the investors in the SPAC want to take the founder’s company public then they must think the price they’re giving them is under market.
Best interpretation of this is founders not wanting to deal with the hassle of an IPO (or preferably DPO) and are willing to take that lower price to avoid the logistics (which doesn’t inspire much confidence in the founders for me).
I suspect a lot these are just about grifting money from the public while passing off a dying company. Cashing out quickly for SPAC investors and founders.
Nikola in particular is basically fraud and going to zero, just hard to know when. I think it’s too difficult to make money with a short position, this biases the market to support this kind of failed company longer than it should.
Galileo in HyperChange said that he called a broker just to know the price of borrowing Nikola shares, and they said that it's 200% APR if I recall correctly. It may have been direvtly after the merger though, I don't know the exact details.
You can actually look this up! IBKR provides SLB (stock loan borrow) rates for users, and someone made a site to report this data. https://iborrowdesk.com/
