Nikola stock craters after chairman fails to rebut fraud allegations


Enlarge / Nikola Chairman Trevor Milton unveils the Nikola One truck in December 2016.

Nikola

Stock in electric truck startup Nikola has plunged for the second straight day after a short-selling investment firm published a bombshell report alleging that the company’s December 2016 unveiling of the Nikola One truck was a brazen fraud. Nikola’s stock lost 11 percent on Thursday and is down an additional 15 percent in Friday morning trading.

At the December 2016 event, Nikola Chairman Trevor Milton repeatedly described the truck as fully functional. But that wasn’t quite true, as Milton admitted to Bloomberg earlier this year. The supposedly hydrogen-powered truck didn’t have a hydrogen fuel cell, nor did it have the motors and gears required to drive the wheels. Milton claimed the parts had been taken out of the truck for safety reasons.

The new report from Hindenburg Research claims that the scale of Nikola’s deception was even greater than was previously known. The firm claims that the prototype’s supposedly functional dashboard display was powered by an extension cord snaking up from under the stage.

Nikola allegedly never had a working prototype prior to the presentation. An anonymous source provided Hindenburg with a late 2017 text message exchange in which a Nikola employee claimed that “we haven’t touched the truck since the show.” He added that he “can’t imagine how much work it would take to get that to run.”

“Let it roll”

Hindenburg’s most explosive allegation focuses on a January 2018 video showing the Nikola One truck supposedly driving on a highway. The video helped to silence those who questioned whether the Nikola One was functional. In a text message exchange reproduced in the Hindenburg report, an employee said he was told that Nikola planned to “tow it to the top of a super low grade hill and let it roll.”

Hindenburg says it has located the spot where the video was filmed: a two-mile stretch of road near Grantsville, Utah, with a consistent 3-percent grade. With a camera at the right angle, the ground looks flat, but it’s actually steep enough for a vehicle to pick up significant speed. A Hindenburg investigator took an SUV to the top of the hill, put it in neutral, and it reached a speed of 56 miles per hour.

Hindenburg’s allegations came at an awkward time for Nikola: just two days after Nikola announced a landmark deal with GM. Under that deal, GM will build Nikola’s Badger pickup truck—as well as supplying batteries. It’s unclear what Nikola brought to the deal besides a brand name and some cash.

To be clear, Hindenburg is far from being an impartial observer. The firm has taken a short position in Nikola’s stock and hence has a strong financial interest in discrediting the company. So the firm’s claims should be viewed with skepticism.

We should also note that there’s little doubt that Nikola has a working prototype of its newer Nikola Two truck. The company has published multiple videos of outsiders being given test rides in the Nikola Two.

Nikola’s non-response

Trevor Milton, Nikola’s founder and executive chairman, wasted no time in denouncing the Hindenburg report.

“Hindenburg is only making people love us more for trying to destroy us,” Milton tweeted on Thursday morning. “It will take the rest of the day to address the one sided false claims, but I will put out a detail report to address it.”

Around dinner time, Milton tweeted that “[i]t’s taken longer to respond to the bull crap” and vowed to “work through the night” on a rebuttal. A few hours later he repeated his vow to work through the night and promised that an in-depth response “will be out before market opens.”

But as the new day dawned, Milton announced he wouldn’t be releasing a rebuttal after all. Instead, the company filed a complaint with the Securities and Exchange Commission charging that the Hindenburg report was false and deceptive.

“On advice of counsel however, I won’t comment further now other than saying that we have involved SEC,” Milton wrote. He claimed to be “pissed” that he couldn’t publish a response, saying that he “would love nothing more than to go out and tell everyone point by point.”

In an official statement on Thursday, Nikola said the company “has been vetted by some of the world’s most credible companies and investors. We are on a path to success and will not waver based on a report filled with misleading information attempting to manipulate our stock.” The company didn’t respond to a follow-up email asking about specific allegations in the Hindenburg report.

I am currently conducting an in-depth investigation into Nikola. If you’re a current or former Nikola employee with information about misconduct by the company—or you want to rebut Hindenburg’s claims—I would love to speak with you. I will protect your confidentiality. You can reach me by email or Twitter direct message—contact information is here.

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