Nikola Stock Plunges as Founder Steps Down Following Accusations

The equity has shed more than 60% this quarter

Digital Content Manager
Sep 21, 2020 at 11:36 AM
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The shares of Nikola Corporation (NASDAQ:NKLA) are down 17.8% at $28.09 at last check, one of the worst percentage losers on the Nasdaq Composite, after founder Trevor Milton stepped down as executive chairman. The decision came after short-selling firm Hindenburg Research accused Milton of nepotism and making false statements to form partnerships with automakers. Though the electric vehicle company appointed Stephen Girsky, former vice-chairman of General Motors (GM), as its newest board chair, the security still got two price-target cuts this morning, including one from RBC to $21 from $49.

On the charts, the security has been extremely volatile of late. While the shares did manage to hit a record high of $93.99 on June 9, thanks to support from its 10-day moving average, momentum has since slowed. The stock's latest rally to the the $54 mark was also short-lived, with shares now down more than 60% for the quarter.

Analysts were skeptical of NKLA coming into today, with three of the five in coverage sporting a tepid "hold" rating. Meanwhile, the equity's 12-month consensus price target of $55.75 is a whopping 99.3% premium to current levels, meaning even more price-target cuts could be coming the security's way.

That pessimism is echoed in the options pits, where puts are outpacing calls. So far today, 113,000 puts have crossed the tape, which is five times the average intraday amount. Most popular is the weekly 9/25 25-strike put, followed by the 20-strike put in the same series, with new positions currently being opened at both.

Traders looking to speculate on Nikola stock's near-term trajectory should consider options. The security's Schaeffer's Volatility Index (SVI) of 145% sits in the 35th percentile of its annual range, suggesting short-term options are pricing in low volatility expectations. In other words, the stock's near-term options are attractively priced at the moment.


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