Nikola (NKLA 0.88%) has an aggressive vision to create a network of hydrogen production and fueling infrastructure for the fuel cell electric heavy-duty trucks it has been building and selling. The company has focused on a niche use case for short-haul trucking needs near port facilities in North America.

While it has made admirable progress with its plans, headwinds for the business have been growing. That has increased fear among investors that the risk-reward balance might not be worthwhile. The result has been a punishing month of August for Nikola stock.

Nikola shares plunged 26.2% for the month, according to data provided by S&P Global Market Intelligence. With sales picking up and the company reporting record revenue in its second-quarter update last month, investors might be wondering whether the dip is a buying opportunity or the stock should just be avoided.

Hydrogen fuel infrastructure

Nikola sold 72 hydrogen fuel cell electric trucks to its wholesale distributors in the second quarter. That, plus regulatory credits it received for the first time, resulted in more than $31 million in second-quarter revenue.

But spending also accelerated as it built renewable energy infrastructure, including hydrogen fuel stations, and added mobile fueling trucks. Nikola offers hydrogen fueling through its HYLA energy segment brand. In just the past couple of months, it opened a new HYLA refueling station in Toronto, Ontario, Canada. It also commissioned a modular station in Southern California and doubled capacity at another modular station.

Nikola CEO Steve Girsky summed up the company's progress in the second quarter, stating:

Our trucks are put to the test every day by end fleet users, hauling freight and delivering to their customers. Q2 is an example of how we're approaching the intersection of mission and reality and how Nikola is out front, charting the course.

However, building out the infrastructure and producing more trucks costs money.

Cash is the problem

With the acceleration in sales, Nikola's net loss from operations in the second quarter improved compared to a year ago. The company ended the second quarter with $256 million in unrestricted cash. But as CFO Tom Okray noted on the company's second-quarter conference call with investors, that was $90 million below where it began the quarter.

That's why Nikola also announced a new capital raise last month. It will raise $80 million through the sale of convertible notes and could double those proceeds with a follow-up offering. The company also filed to allow future security sales that could raise another $500 million.

That's a clear signal that existing shareholders will continue to get diluted as the company maintains enough liquidity to continue growing its operations. That explains why the stock dropped significantly last month. If Nikola does maintain enough capital, it could build enough of an ecosystem of trucks and hydrogen fuel supply to succeed in the long run, though that's a bet that most investors probably shouldn't make.