07.02.202519:28:00UTC+00Nikola Shares Plunge On Bankruptcy Concerns

Nikola Corp. (NKLA) shares plummeted by nearly 33% on Friday, following reports that the electric truck manufacturer is contemplating filing for bankruptcy.

According to The Wall Street Journal, Nikola has enlisted the services of the law firm Pillsbury Winthrop Shaw Pittman to consider restructuring strategies, which may include either a potential sale or seeking Chapter 11 bankruptcy protection.

Since its public debut in 2020, Nikola has encountered severe hurdles, such as a substantial vehicle recall in 2023, and its founder, Trevor Milton, being convicted of fraud and sentenced to a four-year prison term. Earlier in January, Bloomberg highlighted that the company was exploring solutions to its financial distress, including a possible sale.

Insiders suggest that Nikola is gearing up for a possible bankruptcy filing to shield itself from creditors as it battles with a critical cash shortage. Nevertheless, a Nikola representative mentioned that the company is assessing various options, which include acquiring financing as a part of its financial restructuring plan.

This development underscores the challenges faced by electric vehicle startups, which are struggling with high production costs and financial fragility. As Nikola considers its future, investor worries about the company's long-term sustainability are intensifying.

Currently, NKLA is trading at $0.48, reflecting a decline of 36.05% or $0.27, on the Nasdaq.