NKLA Plummets Following Hanwha's Decision to Cut Stake

The security has shaved off 74.4% in the last nine months

Digital Content Manager
Mar 18, 2021 at 10:19 AM
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The shares of Nikola Corporation (NASDAQ:NKLA) are falling, down 5.8% at $15.43 at last check, after South Korean strategic partner Hanwha decided to sell up to half of its 5.65% stake in the company this year. This equates to about 11.1 million shares, or $180 million based on the electric vehicle name's last close. A Hanwha spokesperson added the company will use the proceeds to invest in hydrogen-related businesses. 

Despite rally attempts in September, November and January, the equity has been tumbling down the charts since its June 9, record high of $93.99. The stock is now trading more than six times lower than that peak, and has been consolidating below the $18 level. Longer term, Nikola stock has shaved off 74.4% over the last nine months.

Analysts are hesitant towards the security, with six of the eight in question carrying a tepid "hold" rating, while the remaining two say "strong buy." However, the 12-month consensus target price of $27 is a 77.8% premium to current levels, indicating price-target cuts could be on NKLA's horizon. 

Meanwhile, short sellers have been hitting the exits in droves. Short interest fell 20.6% over the last two reporting periods, but the 30.55 million shares sold still account for a hefty 18.6% of the stock's available float.  

Drilling down to today's options activity, 9,637 calls have been exchanged so far, which is twice the intraday average, and more than double the number of puts traded. Most popular is the weekly 3/26 18-strike call, followed by the March 15 put. Buyers of the latter expect more downside for NKLA by the end of Friday, when contracts expire.

Now could be a good opportunity to weigh in on the stock's next move with options. The security's Schaeffer's Volatility Index (SVI) of 96% sits higher than only 11% of all other readings from the past year. This suggests options players are pricing in lower-than-usual volatility expectations at the moment.

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