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Some weird stuff happening with NKLA. That's the ticker for a startup called Nikola that did a reverse IPO last week (merging with the already-listed special-purpose company, VTIQ).
Nikola plans to sell various kinds of battery electric and hydrogen fuel cell trucks, with production scheduled to start in 2021.
When the reverse IPO was announced, the IPO price implied a valuation of NKLA at $3.3 billion. However, before the deal went through, the price of VTIQ rose from $10 in March to over $30 last week.
Then, after the combined company switched to the new ticker, NKLA, the price continued to rise, closing on Friday (June 5th) at $35, doubling on Monday to over $70 at close, and then continuing to rise to over $90 after hours, for a market cap over $30 billion, higher than the market cap of Ford.
The price has come down a bit today, and sits at $73 at the time I am writing this.
I have not investigated this company in detail. But some commentary from some amateur analysts whom I follow makes it sound to me like the hype has far outpaced the substance.
On Monday, I tried shorting at the open (via orders I'd placed the night before), but luckily for me, no shares were available to short (lucky since the price doubled that day). I tried again later in the day, and there were still no shares available.
It appears that the limited availability of shares to short has pushed traders into bidding up the prices of puts. If I'm reading the options chain right, it appears that a Jan 2022 synthetic long at a $50 strike (buying a $50 strike call and selling a $50 strike put) can be bought for roughly $0. Since the value of a synthetic long should be roughly equal to the price of the stock minus the strike, this implies a price of about $50 for the stock, in contrast to the $70+ price if you buy the stock directly.
That price discrepancy is so big that it seems like there's a significant chance I'm missing something. Can anybody explain why those options prices might actually make sense? Am I just doing the options math wrong? Is there some factor I'm not thinking of?
It's worse than that. If there weren't any shares available at your broker for you to short-sell in the market, you should consider it likely that instead of paying 0.4%/day, you just are told you have to buy shares to cover your short from assignment. This is an absolutely normal thing that happens sometimes when it's hard to find additional people to lend stock (which is happening now).
(Disclaimer: I am a financial professional, but I'm not a financial advisor, much less yours.)