Replies to post #1086 on Nikola Corporation (NKLA)

[Dennisb68]

And if you had bought warrants at $5.00 what would you be doing?

[loginusername]

Smiley - The more I think about it a cashless call makes no sense for them. It does nothing for them. Raises no cash. Just dilutes with lets just say 7 million shares as an estimate. They'd keep the warrants outstanding rather than call cashless. It's not like they dilute earnings. They don't have earnings.
I can do the math that shows a cash call raises money at a good price vs a secondary and cashless call. Too lazy now.

Bottom line - Cashless makes no sense, should not happen, and is very unlikely.
Cash call is a possibility.
DKNG just call for cash btw.

Your thoughts?

[SmileyRiley_595]

I’m prepared for either scenario but I’d prefer to have the option of a cash exercise b/c I want as many shares as possible over the long term.

My belief is Nikola would be more likely to call for a cash exercise as those additional funds will be needed to manage the cash burn with the anticipated hyper growth. There are other ways to raise funds but this would be the easiest by far.

However...

IF NIKOLA’S PRIMARY CONCERN IS WITH DILUTION of existing shareholders vs a need for additional cash, the underlying stock price would have a major influence on their decision. UNDER THIS SCENARIO... The company is more likely to execute a cashless exercise the closer the stock is trading to the lowest required price to initiate the conversion b/c, they’re able to minimize the impact of dilution... Conversely, the higher the stock price goes, the less likely a cashless exercise will take place b/c, the dilution makes less of an impact.

If you use the cashless exercise formula I provided...
NKLA trading at $20 results in a cashless exercise of 425 shs (~60% less dilutive)
NKLA trading at $50 results in a cashless exercise of 770 shs (~25% less dilutive)
NKLA trading at $80 results in a cashless exercise of 856 shs (~15% less dilutive)

As you can see, the impact of a cashless exercise is less effective on dilution as the share price increases.

I hope this helps...