Short-seller Hindenburg tries taking down Nikola

Hindenburg Research raises serious fraud accusations against the prospective electric truck manufacturer Nikola. However, the “research” is anything but neutral, as the company itself has sold Nikola shares short and is thus profiting from any price losses resulting from the paper.

++ Kindly find updates below. ++

The paper itself makes a bold argument that “we believe Nikola is an intricate fraud built on dozens of lies”, citing “recorded phone calls, text messages, private emails and behind-the-scenes photographs” to incriminate Nikola’s founder Trevor Milton as a fraud. They allege that the company’s deals were made in bad faith as the promised hydrogen truck or production technology were not on the level that Nikola claimed. Given Nikola’s recent manufacturing agreement with GM, however, it seems that the US fuel cell startup has managed to catch up.

They also allege that Nikola has released fake videos showing their vehicles in action. Other allegations include that some high-level employees do not have the experience to handle their jobs, such as the director of hydrogen production who has no listed previous experience in hydrogen. Regarding the extensive list of allegations, Nikola has already responded saying that they have “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.”

Nikola’s further response to the allegations have not proven to be advantageous for the US American EV startup – while denying the allegations about their video, they chose to opt for an odd loophole as their excuse: “Nikola never stated its truck was driving under its own propulsion in the video,” as well as: “At no time did Nikola state that the inverter on the prototype truck shown in the video was the Company’s or would be used in production.” The company further claims that they had been transparent with investors: “Nikola investors who invested during this period, in which the Company was privately held, knew the technical capability of the Nikola One at the time of their investment.”

Update 17 September 2020: Falsely accused or not, the fraud accusations against Nikola have just gained some new severe players. Both the US Department of Justice and the SEC, the stock exchange supervisory authority have become involved. The Nikola share continues to lose value.

The SEC announced this week it would investigate the electric truck-maker for “intricate fraud” in tandem with the Justice Department’s inquiry that is being handled by the Manhattan US attorney’s office.

Nikola said in a statement on Monday that they would intend to “fully cooperate with the SEC regarding its inquiry into these matters.”

The SEC will now examine possible violations of securities laws, but the investigation is said to be preliminary and may not lead to any findings of wrongdoing, according to Bloomberg. Also, the Wall Street Journal noted both federal inquiries might result in no formal accusations of misconduct.

Hindenburg had accused Nikola of fraud following a surge in Nikola’s stock value after the company struck a $2 billion deal with General Motors last week, triggering a 40%-rise in the share price in a single day. Overall, shares had risen more than 220% over the previous 12 months, thus proving a bad bet for short-seller Hindenburg.

electrek.co, cnet.com, freightwaves.com, hindenburgresearch.com (the report), nikolamotor.com, yahoo.com (Nikola response), businessinsider.com (update 17 September)