As Nikola Corp. watchers wait to see what number of pre-orders the corporate can rack up for its Badger pickup truck, a special countdown is ready to start for buyers.The upstart firm making an attempt to compete with the likes of Tesla Inc. filed a registration assertion with the Securities and Trade Fee early final week. When that submitting is asserted efficient, a timeline shall be set in movement that may permit Nikola to power buyers to redeem excellent public warrants early. The registration, declaration of effectiveness and compelled early redemption are occasions with the potential to weigh on shares — constructing stress between the corporate and warrant holders, and drawing a taut line between Nikola followers and short-sellers.Consideration on Nikola has been intense with its stock greater than doubling since its merger with blank-check acquisition car VectoIQ on June 4. The shares are a specific darling of the commission-free day-trading set, elevating questions on how a lot of its quirky construction is known by newly minted retail stock dabblers.(Additionally learn: Nikola founder exaggerated functionality of his debut truck meant to rival Tesla)Shares of Nikola have “taken on a lifetime of their very own,” mentioned George Kaufman, funding banking head at Chardan Capital Markets. “Volatility within the shares isn’t associated to elementary adjustments within the enterprise.”One lens into the pressures surrounding the stock focuses on publicly traded warrants that had been part of fairness items bought at VectoIQ’s public debut. As soon as a registration assertion governing the warrants is asserted efficient, it turns into attainable for holders to offer the corporate $11.50 to get one Nikola share.Each Nikola’s stock and warrants fell roughly 11% on Friday as of three:45 p.m. in New York. Nonetheless, with warrants buying and selling freely at $32, and incorporating the $11.50 train price, proudly owning a warrant would appear to depart a whole lot of potential revenue with shares at present buying and selling at round $64. The hole between the 2 reveals the stock’s stomach-churning volatility and the danger one thing occurs to it between now and when the warrants are exercised.(Additionally learn: Nikola wins first purchase score, although goal trails file)The prospect of the warrants being declared efficient may be one of many components behind that hole. Already skittish after such a robust rally, Nikola holders have proven themselves delicate to the potential for contemporary stock to hit the market. The Phoenix-based firm designs and manufactures electrical elements, drivetrains and autos together with the Nikola One and Nikola Two electrical semi vans. (Picture courtesy: Twitter/@nikolamotor) Buyers ought to count on a “near-term pull-back,” because the price discovery course of is underway and the volatility seen in shares following its SPAC merger is “illustrative of the challenges concerned,” JPMorgan analyst Paul Coster mentioned in an initiation report earlier this week. Coster has a impartial score on shares and a price goal of $45.“Within the very quick time period, we consider registration of the SPAC Warrants might result in sale of about 30 million shares, and share registration ought to allow shorts to borrow stock, countering the impact of latest retail accumulation,” he mentioned.(Additionally learn: Nikola quick vendor frenzy sends stock borrow charges hovering)Wariness of that danger was on show in after-hours buying and selling on June 15 when the registration assertion was filed and shares fell as a lot as 12%, prompting founder and CEO Trevor Milton to elucidate on Twitter. That selloff was instantly reversed, with shares buying and selling greater once more inside an hour.As of Thursday, the registration assertion had not been declared efficient. The prospectus registered as much as 23,890,000 shares of widespread stock underlying each private and non-private warrants. Nikola at present has 360.9 million shares excellent, with a few third of that freely obtainable to commerce.In response to queries about the opportunity of compelled warrant redemption, an organization spokeswoman in an electronic mail despatched Friday morning mentioned: “Any such bulletins shall be made public when applicable.”Whereas bears have spent a whole lot of ink warning of the implicit hazard of the warrant train, the opportunity of it taking place has by no means been a secret. Nikola’s shares have sat securely above $60 for practically three weeks, whilst dialogue of attainable dilution turned widespread in chatrooms and different locations the place retail buyers congregate.Complicating issues, when the registration is asserted efficient, an occasion referred to as a compelled cash name can come into play, Chardan’s Kaufman mentioned. If widespread shares shut above $18 for 20 days inside a 30-day interval, Nikola can power warrant holders to pay $11.50 in cash per warrant in exchange for one share of widespread stock or give up their warrants for primarily nothing.“Quick-sellers noticed some reduction and long-only buyers noticed some potential danger within the S-1 submitting, believing the SEC would declare it efficient shortly,” Kaufman mentioned. “Usually, the submitting and the effectiveness of mentioned submitting can put downward strain on shares, which may not be momentary.” Chardan was among the many underwriters of the VectoIQ SPAC IPO that resulted in Nikola.In impact, the sustained rally in Nikola shares places energy within the firm’s palms to name the warrants as soon as the SEC green-lights its registration assertion and hurdles are met. Picture of Nikola Corp’s One hybrid electrical truck (left) and Tesla Semi all-electric truck. “Typically, a holder would need to hold onto the warrant somewhat than exercising it, so the power to power the train is a pro-issuer provision,” Carol Anne Huff, co-head of Arnold & Porter’s capital markets transactions follow, mentioned.From Nikola’s perspective, a compelled cash warrant train would give the corporate an injection of extra capital, however a brief squeeze might make that type of compelled redemption trickier to drag off. Stock borrow charges spiked to a excessive of greater than 700% final week on account of an absence of shares to loan out, S3 Companions’ Ihor Dusaniwsky mentioned. And shares stay at lofty ranges. Those that are hedging their warrants could be quick the underlying widespread shares.If shares proceed to run, the corporate might alternatively power holders to exchange the warrants for a diminished variety of shares with out requiring a cash fee, or simply go away the warrants on the market. Richard Branson’s Virgin Galactic Holdings Inc., whose shares additionally shot skyward after its public debut through a SPAC merger, did a cashless redemption. Virgin’s warrant holders obtained 0.5073 of a standard share for every warrant surrendered.Nikola can determine to take the dilution for no cash, which might end in warrant holders who absolutely hedged their place being quick extra shares than they’d obtain upon a cashless train. This might end in them having to prime up within the public markets, exacerbating any short-squeeze, Kaufman mentioned.That may additionally open up the chance for a further fairness providing, which, assuming shares keep aloft, might fetch extra cash per share.“Why use the cash name when there’s a battleground between the shorts and longs, with the shorts dropping? That’s a good query,” Kaufman mentioned. “This may very well be one of many cases the place not forcing the cash out of those warrants has advantage, however that may be a center finger to warrant holders, a lot of whom are or had been common shareholders earlier than the run-up.”This story has been revealed from a wire company feed with out modifications to the textual content.