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Nikola’s Road to Redemption: From Sky-High Debut to Recent Resurgence

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1 month ago

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Nikola Corp (NASDAQ: NKLA), an electric truck startup, burst onto the Nasdaq scene on June 4, 2020, through a reverse merger with VectoIQ. The initial fervor surrounding the company was undeniable, as its stock debuted at $37.55 per share and skyrocketed to an all-time high of $93.99 on June 9, 2020.

In more recent times, the company faced a fair share of criticism and went through a tough period, with its stock dropping to just $0.52. However, there was a surprising turnaround. Between June 6th, 2023, and August 3rd, 2023, NKLA garnered significant interest and experienced an impressive increase of more than 600% in its stock value.

Once hailed as the “Tesla of trucking,” the euphoria surrounding the stock has since dissipated, leaving investors in a state of disappointment. NKLA’s current trading price hovers just above $1 per share, a steep decline from its previous lofty heights.

The pressing question is whether this dramatic plunge in NKLA’s stock price signifies a promising opportunity for investors or a sinking ship to steer clear of. Can the company still stage a comeback, or is it destined for failure?

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Background:

NKLA’s Turbulent Journey In 2020, a wave of green vehicle manufacturers entered the market through SPAC mergers to capitalize on the electric vehicle (EV) frenzy, and Nikola was among them. Initially, Nikola garnered significant attention and briefly exceeded Ford’s market capitalization due to optimism surrounding EVs. However, this momentum waned after Hindenburg Research released a report that raised concerns about misleading information, leading to the resignation of CEO Trevor Milton. The stock plummeted from its June 9 peak of $93.99 to a low of $13.51 on December 24.

In 2021, Nikola’s stock declined by 38%, and by December, the United States Securities and Exchange Commission (SEC) fined the company $125 million for allegedly making misleading statements about its capabilities, attributed to Milton. Challenges persisted in 2022, resulting in a 79% stock decline and a staggering $784 million net loss. Elevated manufacturing costs and supply bottlenecks, coupled with reduced demand due to surging inflation, took their toll.

What further rattled investors was the company’s “going concern” warning. In its 10-K SEC filing for 2022, Nikola admitted it might not have sufficient funds to stay afloat for a year.

Nonetheless, Nikola experienced a brief resurgence in 2023 due to several favorable developments. The company announced increased deliveries of its battery electric vehicles (BEVs), with retail sales doubling in the second quarter of 2023 to 66 units, and wholesale figures rising from 31 to 45. It also reaffirmed its commitment to deliver its first hydrogen-powered fuel cell electric vehicles (FCEVs) this year. Securing a five-year order for 50 FCEVs from BayoTech, J.B. Hunt Transport’s purchase agreement for 13 Nikola zero-emission Class 8 trucks, and approval of a $42 million grant for constructing six hydrogen stations in Southern California, along with $16.3 million in additional grants, boosted Nikola’s stock from a record low of 52 cents a share on June 6 to $3.71 on August 3 this year.

https://twitter.com/AIStockSavvy/status/1691837163116155099?s=20

Recent Obstacles in NKLA’s Path

  1. Disappointing Projections: In its second-quarter report released on August 4, Nikola significantly lowered its 2023 outlook. Revenue projections for 2023 were revised down to $100-130 million from the previous estimate of $140-200 million. Truck delivery expectations were trimmed to 300-400 units from the prior projection of 375-600 units. The gross margin is now expected to be a dismal negative 110%, worse than the earlier estimate of negative 95%. The management attributed this downward adjustment to extended lead times and scaling issues. Furthermore, the company anticipates cash usage of $220 million in the second half of 2023, hinting at a potential need for capital raising by year-end or early 2024.
  2. Abrupt Leadership Changes: Nikola’s second-quarter report disclosed the abrupt departure of CEO Michael Lohscheller due to family health concerns. Lohscheller played a pivotal role in recent improvements, boosting BEV production, strengthening FCEV efforts, and stabilizing the company’s balance sheet. He was succeeded by Steve Girsky, marking the third CEO change in a year. Additionally, Carey Mendes, responsible for Nikola’s hydrogen branding and fueling station financing, also resigned. Nikola announced Mendes’ departure via an SEC filing without disclosing a successor.
  3. The Recall Dilemma: In June, several of Nikola’s BEVs caught fire at its Phoenix site, initially prompting suggestions of foul play for potential stock manipulation. The Phoenix Fire Department’s investigation, however, found no evidence of arson. One truck that had previously burned reignited in July. On August 11, Nikola recalled approximately 209 Class 8 Tre BEVs, acknowledging that the fires resulted from a coolant leak within a battery pack and dismissing the notion of foul play. The company’s initial response attributing the fires to “foul play” raised questions about transparency and management decisions, further complicating Nikola’s efforts to regain stability and rebuild trust.
  4. Delivery Targets at Risk: Nikola also expressed concerns about achieving its annual delivery goal in the wake of the recall. In a regulatory filing on August 21, the company acknowledged the potential for significant expenses to rectify or replace the faulty part. It also voiced worries about potential adverse effects on the brand, business, financials, and cash flows. Nikola has suspended sales of new BEVs entirely, and this recall is likely to hinder its goal of delivering 250 to 300 BEVs for the year, potentially disrupting the planned FCEV rollout.
  5. Convertible Bond Deal: Nikola’s move to raise funds has raised further concerns among investors. The company plans to issue convertible bonds worth up to $325 million, with the initial closing expected to generate around $125 million. While this will provide an immediate financial boost, it will also lead to share dilution as bonds are converted into shares, potentially impacting the stock’s value.

https://twitter.com/Tone_Blanco925/status/1691932180644082082?s=20

Worthy Investment?

With NKLA shares currently trading at a deep discount, it may present a buying opportunity for those who believe in the company’s long-term vision. However, investing in Nikola at this stage is speculative in nature.

Anybody watching Nikola Motors (NKLA)?
by u/silentsnooc in wallstreetbets

Nikola’s investment case revolves around the growth potential of the hydrogen fuel economy. While investing in the company now involves a degree of speculation, Nikola’s ambitious long-term goals signal its intent to establish a significant presence in hydrogen refueling infrastructure. By 2026, Nikola aims to have 60 refueling stations, including 20 in California, and produce 300 metric tons of hydrogen daily. This could power 7,500 trucks per day, generating $450-500 million in hydrogen revenues. The company has set targets of 1,000-1,250 Tre BEV and 5,000-6,000 Tre FCEV sales, totaling 6,000-7,250 truck deliveries by 2026. It also aims for a positive gross profit margin in the near term and breakeven to positive EBITDA by 2025.

Nikola (NKLA) comeback
by u/silentsnooc in wallstreetbets

However many investors think these goals are overly ambitious at present. Skepticism surrounds these targets, especially in light of recent management changes, underwhelming short-term prospects, and the challenge of aligning aggressive financial projections with the current challenges facing the company. Rebuilding investor trust and demonstrating tangible progress will take time, and the company’s near-term execution and mid-term targets remain sources of concern. Additionally, the issuance of convertible notes

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Disclosure: We have not been compensated for this article/video. MicroCap Daily is not an investment advisor; this article/video does not provide investment advice. Always do your research, make your own investment decisions, or consult with your nearest financial advisor. This article/video is not a solicitation or recommendation to buy, sell, or hold securities. This article/video is our opinion, is meant for informational and educational purposes only, and does not provide investment advice. Past performance is not indicative of future performance.

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Emerging Markets

Lucy Scientific Discovery’s (NASDAQ: LSDI) Game-Changing Move: A Closer Look at the High Times Acquisition

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3 weeks ago

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September 8, 2023

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On August 8th, 2023, Lucy Scientific Discovery Inc. (NASDAQ: LSDI), a leading developer in the psychedelic drug industry, witnessed an impressive surge in its stock value, gaining approximately 25% in combined trading, including after-hours (AH) trading. The British Columbia-based company made headlines by announcing its strategic move to acquire intellectual property (IP) from the renowned cannabis publication, High Times Holding Corp. (HHC).

Additional Background:

Under this agreement, Lucy will exchange 20% of its shares and a series of payments for access to HHC’s valuable IP portfolio, which includes the rights to generate licensing and royalty income from renowned brands like High Times, 420.com, and Cannabis Cup, along with their associated domain names.

Lucy’s commitment involves making semi-annual payments to HHC over a five-year period, structured around earnings before income, taxes, depreciation, and amortization (EBITDA) generated through the acquired IP. The flexibility exists for Lucy to fulfill these payments either in cash or through stock issuance and the announcement is generating considerable interest.

Furthermore, post-acquisition, Lucy will grant High Times the opportunity to operate retail outlets and distribute THC products bearing these prestigious brands within the United States. This privilege comes in exchange for an annual license fee of $1 million, set to double to $2 million annually once federal legalization of cannabis occurs in the country.

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Leveraging the brand rights secured from HHC, Lucy aims to bolster its revenue streams by expanding and enhancing its existing 18 licensing agreements, both domestically and internationally. These arrangements encompass a wide array of consumer products and merchandise, promising to further establish Lucy’s presence in the global market. The acquisition is expected to be finalized within the coming two weeks, marking a significant strategic move for Lucy Scientific Discovery Inc.

As a result of the acquisition, High Times is now a publicly-traded entity. Lucy anticipates that this agreement will contribute over $10 million in revenue to its financial results in the upcoming year, along with $5 million in EBITDA.

Adam Levin, the Executive Chairman of HHC, expressed optimism about the deal, noting, “This transaction will create exciting new growth opportunities for the High Times brand, under the leadership of Richard Nanula, a seasoned executive with extensive experience in major consumer brands and global corporations.”

Levin also emphasized High Times’ enthusiasm in becoming a significant shareholder of Lucy Scientific Discovery. Notably, Lucy completed its initial public offering and Nasdaq listing in February, offering 1,875,000 shares at $4.00 each.

Richard Nanula, CEO of the British Columbia-based company, shared his outlook on the acquisition, stating, “Lucy expects this acquisition to rapidly generate high-margin revenue within the global cannabis sector.”

In recent developments, Lucy introduced the sleep aid product “Twilight,” which includes amanita muscaria and reishi mushrooms. Additionally, the company joined forces with Wesana Health Holdings Inc. (OTCQB: WSNAF) in March to collaborate on the development of the CBD and psilocybin-based drug SANA-013, targeting conditions such as migraines, cluster headaches, and major depressive disorder.

High Times, founded in 1974, has a rich history, featuring works by renowned writers like Truman Capote and Hunter S. Thompson. Since 1988, its Cannabis Cup has stood as the most prestigious cannabis competition globally, with notable judges including Snoop Dogg, Joe Rogan, Tommy Chong, and other prominent figures in the cannabis industry.

While Lucy’s shares showed a nearly 16% increase to reach $0.68 on the Nasdaq exchange on Friday, it is worth noting that they have experienced a decline of over 77% over the past year.

Macro Trend:

In recent times, our articles have prominently featured cannabis-related topics, reflecting the growing popularity of stocks in this sector. LSDI’s acquisition aligns perfectly with the current climate, as the cannabis industry experiences a significant surge, coinciding with the Health and Human Services (HHS) exploring the possibility of reclassifying cannabis from Schedule I to Schedule III of the Controlled Substances Act.

While many countries around the world have already moved towards decriminalization and legalization, the United States has been relatively cautious in its approach. However, the consideration of such a reclassification represents a potential historic turning point. If such a change were to materialize, it would mark a substantial shift in the regulatory landscape, potentially revitalizing cannabis as an attractive investment opportunity. The industry is already showing signs of reestablishing its market presence and could once again become a noteworthy investment option.

We will update you on LSDI when more details emerge, subscribe to Microcapdaily to follow along!

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Disclosure: We have not been compensated for this article/video. MicroCap Daily is not an investment advisor; this article/video does not provide investment advice. Always do your research, make your own investment decisions, or consult with your nearest financial advisor. This article/video is not a solicitation or recommendation to buy, sell, or hold securities. This article/video is our opinion, is meant for informational and educational purposes only, and does not provide investment advice. Past performance is not indicative of future performance.

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WM Technology’s (NASDAQ: MAPS) Stock Surges 91% in Mysterious Rally: What’s Behind the Boom?

Published

4 weeks ago

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September 5, 2023

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WM Technology’s (NASDAQ: MAPS) stock has exhibited remarkable growth, surging by an impressive 91% since August 16th, 2023. Intriguingly, this surge occurred in the absence of any substantial news or filings from the company, with their most recent release dating back to August 23rd, 2023. This limited information raises the question: What is driving this impressive rally? We will delve into the details below to shed light on the matter.

Cannabis Industry:

If you’ve been following our newsletter, you may have noticed our recent article spotlighting Flora Growth Corp. (NASDAQ: FLGC), along with larger players like Cronos Group Inc. (NASDAQ: CRON), and Canopy Growth Corporation (NASDAQ: CGC).

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In case you haven’t had a chance to read it, you can find the article here, featuring a dedicated section on the broader trends shaping the cannabis industry.

For those seeking a quick summary, a significant development has emerged in the cannabis landscape. A high-ranking official at the Department of Health and Human Services (HHS) has proposed moving cannabis from Schedule I to Schedule III of the Controlled Substances Act. This shift marks a historic moment and comes after a comprehensive yearlong investigation requested by President Biden.

It’s worth noting the potential implications of this change for U.S.-based, plant-touching marijuana companies. Currently, these companies are restricted from trading on major exchanges like the NYSE or NASDAQ and are relegated to smaller markets such as the OTC, or smaller Canadian markets like the TSX, CSE, or NEO.

The CEO of Trulieve Cannabis Corp. (OTC: TCNNF), Kim Rivers delves into these implications in a podcast conversation with a Twitter user known as @stock_mj. She also recommends keeping a close eye on the AdvisorShares Pure US Cannabis ETF (MSOS) as the cannabis sector garners increasing attention from investors.

Weedmap’s Earnings:

To evaluate the potential of MAPS, it’s essential to examine their recent earnings and assess the fundamentals. Here’s a brief overview of the news release.

Revenue: Amounted to $50.9 million, representing a decline compared to the same period in the prior year when it reached $58.3 million.

Net Income: Recorded at $2.0 million for the second quarter of 2023, marking a significant decrease from the previous year’s figure of $19.8 million.

Adjusted EBITDA: Showed substantial improvement, totaling $10.2 million in the second quarter of 2023, as opposed to a negative figure of $(0.6) million in the same period of the prior year.

Cash: As of June 30, 2023, the company held $24.6 million in cash, noteworthy for being entirely debt-free.

WM Technology’s Executive Chair, Doug Francis, underscored the company’s dedication to reinforcing its financial position and delivering sustained growth.

Guidance for the third quarter of 2023:

Revenue: An estimated $47 million.

Non-GAAP Adjusted EBITDA: Approximately $4 million.

It’s important to note that these projections are subject to potential variations based on various factors and developments.

Furthermore, WM Technology announced the transition to Moss Adams LLP as its new independent registered public accounting firm, effective upon the filing of the Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, following the resignation of Baker Tilly US, LLP due to staffing constraints.

Although the company maintains a debt-free status, it’s crucial to recognize that there has been a substantial decline in both revenue and net income. Consequently, it is advisable to exercise caution when considering investment, as the current trajectory of their top-line figures does not exhibit a positive trend.

https://twitter.com/5teelersfan/status/1699102436672299134?s=20

Weedmap’s Strategic Partnership:

Furthermore, the company made another recent announcement regarding its strategic partnership with the producer of “The Freak Brothers,” a celebrated stoner comic series that has captivated audiences for over five decades.

The series follows the adventures of three stoner characters and their cat, who awaken from a 50-year slumber induced by a magical strain of weed in 1969, now navigating life in contemporary San Francisco.

Key highlights of this partnership include in-episode Weedmaps integrations in the upcoming second half of “Freak Brothers” season two, commencing on September 24th. Additionally, exclusive “Smoke & Screen” events will be held across the U.S., bringing together influential figures from both the cannabis and entertainment industries.

“The Freak Brothers” series, based on Gilbert Shelton’s cult classic comic, celebrates its 55th anniversary with a star-studded voice cast for Season 2, featuring Woody Harrelson, John Goodman, Pete Davidson, Tiffany Haddish, Adam Devine, Blake Anderson, Andrea Savage, La La Anthony, ScHoolboy Q, and a special guest appearance by Joe Sikora.

To watch Season 2 of “The Freak Brothers,” visit Tubitv.com, and for cannabis-related information, explore Weedmaps.com. For more on “The Freak Brothers,” visit the official website at www.thefreakbrothers.com.

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Disclosure: We have not been compensated for this article/video. MicroCap Daily is not an investment advisor; this article/video does not provide investment advice. Always do your research, make your own investment decisions, or consult with your nearest financial advisor. This article/video is not a solicitation or recommendation to buy, sell, or hold securities. This article/video is our opinion, is meant for informational and educational purposes only, and does not provide investment advice. Past performance is not indicative of future performance.

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Emerging Markets

Cannabis Industry Surges: Flora Growth Corp. (NASDAQ: FLGC) Leads the Way with 77% Intraday Jump

Published

1 month ago

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August 31, 2023

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Flora Growth Corp. (NASDAQ: FLGC) experienced a remarkable intraday surge of over 77%. While the company has made significant announcements recently, today’s surge occurred without any specific filings or press releases to explain it. There seems to be something substantial driving this trading frenzy, a broader force impacting the entire asset class.

It’s worth noting that established industry leaders like Canopy Growth Corporation (NASDAQ: CGC) and Cronos Group Inc. (NASDAQ: CRON) have faced significant downtrends in past years. However, today’s market activity also lifted their stocks along with others. To understand this trend, let’s take a closer look at the larger market dynamics at play.

 

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What Happened:

A top official at the Department of Health and Human Services (HHS) has recommended moving cannabis from Schedule I to Schedule III of the Controlled Substances Act, marking a historic shift. This move follows a comprehensive yearlong investigation requested by President Biden.

https://twitter.com/NotFinancialRep/status/1697189406665245149?s=20

In the short term, this won’t significantly impact the cannabis industry, as the Drug Enforcement Agency (DEA) needs to conduct its own review and the federal prohibition on marijuana remains. However, the HHS recommendation, if followed by the DEA, could happen within a year, possibly before the 2024 presidential election.

Long-term implications for the cannabis industry are uncertain, but a key immediate effect would be the elimination of Section 280e of the IRS tax code for cannabis businesses. This provision currently prevents them from claiming standard business deductions, a major financial burden.

While rescheduling won’t directly open up access to institutional banking, it may attract new capital sources due to reduced risk perception among investors. Smaller banks and lenders might become more willing to engage.

Eliminating 280e could also stimulate lending in an industry with high borrowing costs, as companies would have improved cash flow. This might lead to lower interest rates and greater access to operating and expansion capital.

Rescheduling could benefit publicly traded cannabis companies, potentially enticing more exchanges, like the Toronto Stock Exchange, to accept U.S.-based cannabis businesses. It could also encourage Congress to take further action, such as passing the SAFE Banking Act and broader reforms.

Overall, while the exact implications of rescheduling are uncertain, the HHS announcement signals progress toward a post-prohibition reality for the cannabis industry, which is a significant development.

https://twitter.com/S_Andreoni/status/1697289527180562880?s=20

Having set the stage with the broader cannabis industry context, let’s delve into Flora Growth’s recent developments and their implications for the company’s future. Is Flora Growth strategically positioned to leverage the potential easing of restrictions in the cannabis sector?

European Expansion:

Flora Growth just formed a partnership with TruHC Pharma GmbH, a leading medical cannabis expert based in Hamburg, Germany. TruHC holds key certifications for importing, distributing, and manufacturing medical cannabis and is awaiting an EU-GMP license for its cutting-edge cannabis laboratory.

Hendrik Knopp, a respected legal professional and entrepreneur, and his team from TruHC are joining Flora, bringing their extensive expertise in pioneering medical cannabis in Germany. This partnership is seen as very valuable, especially as Germany and the European Union move towards making medical cannabis more accessible to patients.

Clifford Starke, CEO of Flora, expressed excitement about the collaboration, recognizing the potential to contribute to the growth of the medical cannabis industry as regulations evolve. The partnership aims to capture a significant market share in Germany.

Hulk Hogan Partnership:

Flora Growth also just recently entered an exclusive worldwide partnership with WWE legend Hulk Hogan to launch a range of consumer products through Just Brands. These products will include CBD-infused items like pre-rolls, topicals, edibles, and more, which Flora will produce and sell globally. The partnership aims to capitalize on Hulk Hogan’s iconic status and Flora’s global distribution network. The initial agreement is for three years, with potential renewals, targeting $20 million in sales over the first 24 months. Flora will pay royalties and license fees for Hulk Hogan-branded products.

Conclusion:

In summary, the cannabis industry appears ready for a resurgence, buoyed by renewed investor optimism and shifting market dynamics. Our focus today was Flora Growth Corp. (NASDAQ: FLGC) but larger names like Canopy Growth Corporation (NASDAQ: CGC) and Cronos Group Inc. (NASDAQ: CRON) are among the many companies benefitting from this positive trend.

We will update you on FLGC when more details emerge, subscribe to Microcapdaily to follow along!

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Disclosure: We have not been compensated for this article/video. MicroCap Daily is not an investment advisor; this article/video does not provide investment advice. Always do your research, make your own investment decisions, or consult with your nearest financial advisor. This article/video is not a solicitation or recommendation to buy, sell, or hold securities. This article/video is our opinion, is meant for informational and educational purposes only, and does not provide investment advice. Past performance is not indicative of future performance.

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