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A Warning About Nikola's Recent Stock Surge

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As I write this on Thursday afternoon US time, Nikola (NKLA) is posting massive gains, up close to forty percent from Wednesday’s close. That means that the stock has gained more than two hundred and fifty percent since it hit its all-time low of $0.52 just over a month ago. That is a “meme-stock” like performance and the chances are that the jump isn’t over yet, but if you are tempted to get involved, understand one thing. Just like the original meme stocks like GameStop (GME) and AMC entertainment (AME), it will probably give back most if not all of its big gains before too long. The reasons are a little different, but the end result will likely be the same.

The jump on Thursday was caused by the announcement of a deal with BayoTech Inc., a hydrogen fuel producer and supplier. BayoTech will buy up to fifty of Nikola’s HYLA brand fuel-cell powered trucks, while Nikola will, in turn, use BayoTech hydrogen. It sounds like a mutually beneficial deal and an order for fifty trucks is no bad thing for Nikola, but those of us who have been following Nikola for a while will get a nasty sense of deja vu. We have seen this movie before, and it did not end well.

Back in June of last year, Nikola also made a big announcement about an order, at that time from Walmart. That prompted a lot of small investors to pile into NKLA, but they were disappointed. The stock lost around ninety percent of its value over the next year or so as institutional…





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