Why Did Nikola Stock Fall 26%? There Was a Lot of News to Digest.

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Shares of electric heavy-duty truck maker

Nikola

fell sharply after the company reported better-than-expected second-quarter results. But the earnings numbers aren’t the only things that matter right now.

Nikola (ticker: NKLA) reported a loss per share of 20 cents from sales of $15.4 million on Friday morning. Wall Street was looking for a 22-cent loss from sales of $15 million. The company produced 33 trucks and delivered 45 in the quarter.

That compares to a loss of 26 cents on sales of $11.1 million in the previous quarter. The company produced 63 trucks and delivered 31 in that quarter. In the year-ago quarter, Nikola reported a 25-cent loss from sales of $18.3 million, and produced 50 trucks and shipped 48.

Nikola stock closed up 12% to $3.40 on Thursday before results were released. Shares fell 26% to $2.50 on Friday, while the

S&P 500
and

Nasdaq Composite
fell 0.5% and 0.4%, respectively.

Shares were initially up after-hours after a long-running and strange saga for Nikola came to an end Thursday evening. After months of trying, the company announced that Proposal 2 had received enough votes from shareholders to pass. Approval was necessary for Nikola to issue more shares that can be sold to raise needed capital.

The proposal took time to pass because not enough shareholders were voting. In previous votes, a majority of voters were in favor of Proposal 2, but the shareholders voting yes didn’t have enough shares to amount to 50% of the total shares outstanding.

Most of the time, issuing more shares isn’t a problem for companies. Bumping up against a cap tied to a company’s bylaws, which happened with Nikola, is a little unusual. What’s more, the number of shares a company has isn’t typically of concern to investors. The number is an accounting placeholder. What matters more is the market capitalization, which is calculated by taking the number of shares times the stock price.

Nikola will need more capital to build its business. Management estimates another $600 million will be needed, beyond what it has available, to achieve profitability. Nikola ended the second quarter with roughly $310 million in cash on its books and total liquidity of more than $740 million. Wall Street expects the company to use about $150 million a quarter and doesn’t project positive free cash flow until 2027.

Cash use came in below $150 million for the second quarter as the company reduced capital spending and operating expenses. Management says it should be able to maintain cash used below the $150 million level per quarter.

Lower cash use is a positive, but the likelihood of coming capital raises might be another factor weighing on shares. Investors don’t like to buy stock ahead of an offering. Shares might also be weak because they were up about 300% in the three months coming into Friday’s earnings report.

Looking ahead, Nikola expects to deliver 60 to 90 trucks in the third quarter and 300 to 400 trucks for all of 2023.

The company also named a new CEO Friday. That’s a surprise and another concern weighing on investors’ nerves.

Board chair Stephen Girsky is taking over from CEO Michael Lohscheller, who stepped down effective immediately. Girsky is a former vice chairman of

General Motors

(GM). Lohscheller is stepping down due to a family health matter, according to the news release.

It has been a busy news cycle for Nikola.

Write to Al Root at allen.root@dowjones.com