Electric vehicle (EV) startups, including Nikola and Lordstown Motors, are experiencing a remarkable surge in their stock prices this week, despite the absence of any significant news or catalyst. Analysts and traders speculate that this rally could be attributed to a potential short squeeze in these heavily shorted stocks.
Nikola, for example, has seen its value more than double, while Lordstown and Workhorse Group have also witnessed substantial gains. Additionally, Carvana, a used-car retailer with a high short interest, has seen a significant increase in its value. These EV startups have collectively added over $500 million to their market capitalization this week.
Tesla, the leading player in the EV market, has also been enjoying a record-winning streak in its stock performance. The surge in the shares of these EV startups has been influenced by Tesla’s movements, further contributing to their gains.
Retail investors have shown strong support for these stocks, with Nikola being the fifth most traded U.S. stock by retail investors. Carvana and Faraday Future, another EV startup, also rank among the top 20 stocks traded by retail investors. The retail investor interest in these companies has played a role in driving up their stock prices.
This rally could potentially aid Nikola in overcoming the risk of being delisted from Nasdaq. The company had received a notice from Nasdaq in May due to its share price falling below the minimum level of $1 for 30 consecutive days. If Nikola’s stock remains above $1 for ten consecutive business days, it will regain compliance with Nasdaq’s requirements.
While the recent surge in stock prices is positive for these EV startups, they still face numerous challenges. Nikola and Lordstown have seen substantial year-to-date declines of 35% and 75%, respectively. Rising interest rates and inflation have limited their access to funding, making it challenging to bolster their production efforts and preserve their cash reserves.
Lordstown is also embroiled in a contentious dispute with investor Foxconn, which has threatened to withdraw a crucial $170 million funding commitment for the EV manufacturer. These challenges highlight the obstacles that these EV startups need to overcome as they navigate the competitive and evolving EV market.
