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Serious accusations against the largest partner of the hydrogen company Nel reduce public participation.
Before last weekend, the Hindenburg Research agency released a full report. Here, they accuse Nel’s partner Nikola Motor Company and CEO Trevor Milton of “sophisticated fraud.” The listed company owns a large stake in Nikola.
– This has consequences for Nel in several ways. This applies both to their shareholding and to the customer relationship they have with Nikola and how it will develop in the future.
– If there is support in this report, it is too early to say anything about it, but Nikola has already appointed lawyers for the case, says investment economist Mads Johannesen at Nordnet to Nettavisen Økonomi.
Also read: The government thinks hydrogen is too expensive, it will not invest in hydrogen cars and trucks
Stock market winner
The hydrogen company Nel has been a winner of the bag in 2019 and 2020 and also a favorite of small savers. But the accusations against Nikola have sent prices skyrocketing in recent days (see chart below).
CLEARLY BELOW: The serious accusations against Nikola have reduced Nel’s stock, but it has once again been dragged down by the issue price.
Photo: (Front)
– Yes, the interest among our clients has been very high for a long time. With 13,500 shareholders and more than 35 percent of the daily operations at Nel, there is great interest from Nordnet’s clients, says Johannesen. And now the hydrogen company will raise more money.
In June, Nel raised 70 million new shares at a price of NOK 18.45 each. On the same day, Nel announced that the company would raise a new 200 million in a so-called small saver repair problem at the same price. In this way, the share capital will be further expanded.
FAVORITE: Nel has long been a favorite of Nordnet clients, but investment economist Mads Johannesen says Nel is now affected by turmoil.
Vain
The hydrogen company will issue 10.84 million new shares. If you were a Nel shareholder in mid-June, you can participate in this capital increase.
Nel’s market price earlier this week was below the issue price of NOK 18.45. Then he could have bought cheaper shares on the market, and there was no reason to subscribe to this capital increase.
On Friday morning, the price is almost 19 crowns, but just over a week ago it could have earned 4-5 crowns per share.
Also read: Small savers escape a stock market rocket
Turbulence
– There has been strong turbulence in Nel’s stock after Nikola has been in bad weather following allegations that the company is involved in “sophisticated fraud,” according to the Hindenburg analytics agency. This has probably hit Nel in a negative direction and as such the repair problem will be very inconvenient, says Johannesen.
Before the summer break, the hydrogen company received NOK 1.3 billion from large owners selected to work on larger and more numerous projects. The money should also go towards strengthening the organization and investing in research and development.
This capital increase is aimed at existing owners who were not allowed to buy shares in June.
Johannesen says Nel has had a history of using rising stock prices to get new money from owners. So far, both the company and investors have benefited greatly from it.
Also read: Here you can earn a lot of money with stocks now: – It is clear that they are facing very strong growth (+)
Equal terms
Most of these issues have been so-called private placements for large clients: only select large clients have been allowed to buy shares.
– But since Nordnet’s small savers and other international brokers own more than 40 percent of Nel, they have also fixed various repair problems. This is positive, as small savers can participate on equal terms with large investors, Johannesen says.
Nel’s action does not arouse absolute enthusiasm among professionals. Chief Investment Officer Robert Næss at Nordea is highly critical of Nel’s valuation, in part because the company has never made any money from what it does.
Popular action
Other popular businesses that have taken money from the public have collapsed. For the small shareholders who subscribed to last year’s Norwegian issue, things have gone completely wrong. Virtually all the value of the stock is gone.
– Norwegian has been a failure for shareholders, do you fear something similar here?
– The similarity between Norwegian and Nel is that they have become so-called public shares, but the evolution of the share price has gone in the opposite direction.
– Norwegian has so far been a slaughter for investors who participated in the issue this summer, while Nel has consistently raised money at an ever-higher share price. So if you think history will repeat itself, I view Nel’s problem in a positive light, Johannesen responds.
Also read: Tesla collapse in the stock market: should be down 90 percent
Conscious risk
– Which of the small savers do you think you should subscribe to in an issue of this type, and who shouldn’t?
If you have faith in the company and are aware of the risk involved in subscribing to broadcasts, you should participate in the broadcast. It’s also financially advantageous at the time of this writing, replies the investment economist.
But it’s more about what you’re personally comfortable with when it comes to risk and financial exposure.
If enough people are interested, it could be an over-subscription: the demand for the number of shares exceeds the supply of 10.84 million. In that case, it will be a proportional allocation, small savers will not be able to buy all the shares they want. If the stock price remains at the current level, there is little reason to fear oversubscription.
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Great interest
– It remains to be seen. Historically, Nel’s issues have been of great interest and the company has reported great interest each time they have reported that they will raise money. For the moment, I think this interest will continue, predicts Johannesen.
But he said that before Wednesday’s price drop.
The subscription period began on September 10 and runs until Monday, September 21.
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