Insider buying can provide clues as to a stock’s future direction. Insiders sell stock for many reasons. But they only buy stock for one reason – they expect it to rise.
Here, we are going to highlight some interesting insider buying at Nikola Corp (NKLA:US). Nikola is an electric vehicle company that is in the process of developing a number of zero-emission vehicles. It is listed on the NASDAQ Global Select Market and currently has a market capitalization of $13 billion.
Nikola Corp: insider buying
What’s caught our attention here is a large purchase from Nikola’s Executive Chairman Trevor Milton. Form 4 filings show that on 14 September, the insider bought 41,400 Nikola shares at a price of $30.91 per share. The total cost of the purchase was $1.3 million.
Source: 2iQ Research
The reason this insider transaction stands out is that Milton is the Founder of Nikola and holds a controlling interest in the company. He’s also very active in the day-to-day operation of the organization and has assisted in the design of nearly every part of the Nikola One truck including rotor / stator, inverters, controllers, DC to DC, motor gearbox, thermal management, battery and ESS, infotainment and more. It’s likely that he has an excellent understanding of the company’s products and its prospects. This large purchase suggests that he is confident about the future.
Nikola Corp has been in the headlines recently after short seller Hindenburg Research published a report on the electric vehicle developer, alleging a range of misdeeds. The report alleged that Nikola has presented a prototype truck as being closer to market than it actually is and that the company has made false statements about possessing proprietary technology to form partnerships with large automakers. NKLA stock fell from around $42 to $32 on the back of the report, losing nearly a quarter of its value.
Nikola has hit back at the short report, stating that the allegations made by Hindenburg are “false and misleading.” The company has also said that it has hired a law firm to explore legal action against the short seller and that it welcomes the SEC’s involvement in the matter.
It’s still too early to know if there’s any truth to Hindenburg’s claims. However, the large purchase from Chairman Trevor Milton indicates that he believes the company has done nothing wrong and that he expects the stock to bounce back. Given the size of this insider purchase, we think $NKLA stock is worth monitoring closely right now.