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Nikola stock: Should I buy it in October?

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  • Two women sued Nikola’s founder Trevor Milton over alleged sexual abuse
  • Shares of Nikola recovered to close over 24% higher on the week
  • If General Motors and Nikola agree to finalize the agreement, Nikola stock price is likely to erupt higher

Nikola stock price recorded another volatile week after its founder was accused of sex abuse. Shares closed nearly 25% higher to recover a portion of losses from the previous week. 

Fundamental analysis: New accusations targeting Milton

Reports of alleged sex abuse against the founder and former executive chairman of Nikola Trevor Milton emerged this week. He voluntarily resigned as Nikola’s executive chairman two weeks ago after a report in Hindenburg Research revealed fraud allegations against Nikola

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Two women sued Trevor Milton over alleged sexual abuse when both of them were 15 years old. According to Milton’s cousin Aubrey Ferrin Smith, Milton sexually abused her at a family funeral in Salt Lake City over 20 years ago. 

The second incident allegedly happened in 2004. Milton, who was 22 back then, hired a 15-year-old girl to work alongside him in a security firm he founded in Utah. 

“The allegation by my client is that he digitally penetrated her vagina with his fingers, which under Utah law constitutes object rape, and that is the charge the police will be investigating, in addition to forcible sexual abuse, which includes any ancillary touching of the vagina during the assault,” Johnson told CNBC.

On the other hand, Milton’s spokesperson Brandon Messinadenied the allegations.

“Mr. Milton strongly denies these false allegations. At no point in his life has Mr. Milton ever engaged in any inappropriate physical contact with anyone.”

New reports arrive in a bad moment for the company as it is engaged in discussions with General Motors (NYSE: GM) to complete a $2 billion deal. The carmaker signed a deal with Nikola centred on electric trucks.

“Our transaction with Nikola has not closed. We are continuing our discussions with Nikola and will provide further updates when appropriate or required,” a GM spokesperson wrote in an email to CNBC. 

“Both sides are still negotiating. As soon as we have something to report, we will. But it is definitely still continuing,” Colleen Robar, Nikola spokesperson said yesterday.

Technical analysis: Volatile price action

Nikola share price gained almost 25% this week to return above the $20 handle. As seen in the weekly chart below, the 200-DMA provided strong support for the buyers around the $16 handle. 

Nikola stock weekly chart (TradingView)

At this stage, it’s best to stay on the sidelines and wait to see the outcome of talks between Nikola and General Motors. In case the latter stays committed to a preliminary agreement, we can expect Nikola stock to erupt higher. 

The first target for the bulls is the horizontal resistance at $29. Oppositely, the GM pulling out of the deal is likely to result in a new sharp move lower in NKLA. 

Summary

Shares of Nikola recovered to close over 24% higher on the week after new reports targeting the company’s founder Trevor Milton emerged this week.