On paper, this trade has already been a home run for Jeff Ubben and ValueAct, turning $154 million of its investors' money into $1.46 billion in possibly the best example so far in the new stakeholder era that mitigating issues associated with climate change and social inequities are being rewarded with high valuations and excess returns.
Ubben was appointed to the board on June 3.
Nikola is a company focused on the development of next generation smart transportation. It will potentially be a global leader in zero emissions heavy duty trucks and hydrogen infrastructure and the only pure play hydrogen powered vehicle company listed in the U.S.
ValueAct SF learned about Nikola through its investment in Flex Fuel in the incubation phase of ValueAct SF, learning about electrolysis and the uses of hydrogen to clean engines as well as to store energy. Subsequently, ValueAct SF called Nikola Motors in the fall of 2017 to explore their use of hydrogen fuel cell technology and large-scale electrolysis to move to zero carbon for long-haul trucking. They remained in contact with the company until the hydrogen truck was built and then flew to Phoenix to be the first to see the truck and drive it with Trevor Milton, the founder of Nikola.
ValueAct SF characterizes Nikola as a merchant energy storage company. They believe that energy storage will create tremendous value as low-cost daytime solar energy is time shifted to be used by Nikola trucks, and later by other hydrogen trucks; that large scale electrolysis will turn water into green hydrogen long term, providing the end-game solution by avoiding the extractive nature of batteries; and that Nikola's billions of dollars in heavy-duty, zero emission, hydrogen fuel cell, 100% electric drivetrain heavy duty-trucks is the offtake that amortizes the fuel stations. If so, Nikola has a significant headstart and is likely to be the infrastructure provider to the hydrogen economy.
Nikola's business model uniquely supplies both the truck and hydrogen fueling infrastructure, solving the fleets' concerns of where to refuel with green hydrogen at competitive pricing to diesel. It is important to note that the hybrid solution that Nikola has designed includes battery power for start/stop with hydrogen providing the range, while reducing the truck weight by half relative to solely battery-powered alternatives. This solution is easily ported to light trucks, which will have superior ability to haul and climb. Nikola can be the intel inside as both heavy-duty and light truck manufacturers play catch-up with expensive emission regulation.
Nikola will use its investment proceeds to accelerate its portfolio of battery-electric and hydrogen fuel-cell electric vehicles ("FCEVs") targeting zero emissions globally and to build out a hydrogen station infrastructure to support its trucks. Nikola has more than 14,000 pre-orders representing more than $10 billion in potential revenue and two-and-a-half years of production. The company expects to generate revenue by 2021 with the roll out of its BEV truck, followed by FCEV truck sales starting in 2023 and the initial build out of hydrogen fueling stations to serve Nikola customers' fleets, such as Anheuser-Busch.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments.