Scathing Report Accuses Nikola of Fraud

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Image: Nikola

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While we’ve suspected that electric vehicle startups and green tech, in general, is probably a little overvalued, we’ve never accused anyone of outright fraud. Burgeoning automakers have a tendency to over promise and under deliver. Throughout history, this has occasionally gotten them into serious trouble. But it’s also how the game is played, especially when you’re new to the scene and need to distinguish yourself from giant entities who would just as soon crush you in lieu of risking the eventual competition. Nikola is a perfect example of this and built a hype train so swift that legacy brands could only hope to buy it out or invest and share in the fruits of its labor before it sped away.

But what if it wasn’t ever growing any industrial fruit?

That’s the claim being made by Hindenburg Research — which specializes in short selling, pointing to firms on the cusp of financial disaster (hence the name), and attempting to bust businesses the Securities and Exchange Commission (SEC) might be interested in. The financial research firm has suggested that Nikola founder Trevor Milton had misrepresented what the company was actually capable of in terms of product, with the intent to mislead investors into thinking the company should be incredibly valuable. It reads like a hit piece and was accused by Milton of being just that. However, there are issues brought up in the report that are still worth examining.

While most of our concerns surrounded a lack of functional prototypes that were supposed to showcase Nikola’s proprietary technologies, Hindenburg opens by accusing Trevor Milton of being a career fraud. It also answers our questions about what General Motors is supposed to be getting out of its $2-billion partnership with the startup other than EV razzmatazz. Assuming the report can be taken at face value, GM should only expect a good hosing.

Milton responded to the report on Thursday, saying Hindenburg just wanted to tank its share price for the purposes of short selling. “It makes sense,” he tweeted. “Tens of millions of shares shorted the last day or two to slam our stock and hit job by hindenburg [sic]. I guess everything is fair game in war, even a hit job. I know who funded it now. Give me a few hours to put together responses to their lies. This is all you got?”

Over the next several hours, Milton said he was working on a response that would refute every claim made against it but had to delay a formal release of that information as Nikola has since involved the SEC. “Have to let them run their process. I want you to see how I have addressed each point, but it will have to wait to be until the SEC finishes their work,” Milton said on Friday. “Let’s be clear, Nikola approached the SEC, not the other way around. The author [of the report] wanted emotion and we won’t give it to them.”

Most of the criticisms in the paper focus on Nikola telling rather than showing its wares. Where’s all that proprietary technology we’ve heard so much about? Why would Milton appoint his brother, Travis, to lead the Hydrogen Production/Infrastructure unit when he had zero experience in the field? What’s up with all these claimed order cancellations and lawsuits from large firms and is there any truth to the report’s embezzlement claims?

Hindenburg claimed to have evidence (recorded calls, texts, and some legal documents) that proves the company staged a video showing a truck that appeared to be functional, which it was actually towed to the top of a hill and allowed to roll down. The accusations are reminiscent of a Bloomberg piece published in June that claimed the Nikola One wasn’t functional during its initial debut, despite Milton’s claims it was “not a pusher.” This was roughly the same time people started to become critical of how much outsourcing the company was doing in regard to the battery components it was supposed to be developing in house.

So was it just a hit piece intended to put a dent in Nikola’s frankly ludicrous market value or are we peering into a totally bogus company? We can’t say for sure, but certainly it functioned as the former. Nikola’s stock tumbled by more than 13 percent on Friday morning and news of the Hindenburg report continues to spread. Meanwhile, Mr. Milton really needs to respond to some of the accusations directly. It seems like the company could end a lot of speculation by just showing the One puttering around a parking lot or issuing a statement on the status of its proprietary battery and hydrogen tech. But lawyers have gotten involved and Nikola says it now has to wait on the SEC before it can defend itself.

In the meantime, you can check out the Hindenburg report for yourself here.

[Image: Nikola]

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