By on September 14, 2020

Following a scathing report from Hindenburg Research that called Nikola a fraudulent company largely dependent upon the blind excitement surrounding electric vehicles, the accused has finally issued a response. On Monday, Nikola released a bulleted letter suggesting the report was the act of an opportunistic short seller that was attempting to take advantage of the period immediately proceeding the announced partnership with General Motors. While Hindenburg didn’t exactly hide that aspect of itself in its own report, it frames the business as only profiting off companies that weren’t above board to begin with. It also received support from Citron Research, which said it likewise thought Nikola needed to be scoped out by the Securities and Exchange Commission (SEC) and promised to help pay for half of any legal fees incurred as a result of Hindenburg’s reporting.

Meanwhile, Nikola was crafting its rebuttal after founder Trevor Milton explained he had to wait on a comprehensive response because he was already in contact with the SEC. As his constant Twitter updates started to become counterproductive, this was likely a wise decision. The response dropped on Monday, clearing a handful of items up while making a bunch of other aspects seem even more suspect.

For example, one of our biggest concerns was the rumors that the Nikola One semi that debuted in 2016 couldn’t actually drive under its own power. We weren’t alone in fretting over that either, Bloomberg reported on the issue in June and Mr. Milton became so outraged he suggested the reporter be fired and threatened a lawsuit.

But here’s the rub  the EV company literally admits it wasn’t functional in its rebuttal.

From Nikola:

As Nikola pivoted to the next generation of trucks, it ultimately decided not to invest additional resources into completing the process to make the Nikola One drive on its own propulsion. After pivoting, Nikola produced prototypes for the Nikola Two, which are self-propelled and have been frequently demonstrated, beginning with demonstration runs at Nikola World in April 2019.

The Nikola One was an incredibly successful proof of concept, and everything the Company learned from that experience has underpinned the successful development of its next generation of trucks that can be seen driven here.

The link takes you to a clip from April 2020 where a finished-looking product makes a lap of a parking lot. But that’s not the vehicle everyone is worked up about, it’s that proof of concept from 2016. Milton had previously said the prototype One semi was “fully functions and works,” however the latest from Nikola seems to suggest the contrary.

There were other items like that, too. At one point Nikola flat out admits the prototype wasn’t operational in a commercial from 2017 where it was filmed moving down the highway. Hindenburg Research framed it as intentionally misleading while the EV firm said it was Hindenburg engaging in trickery because the company never stated its truck was driving under its own propulsion in the video, although the truck was designed to do just that, and claimed investors knew that. A similar explanation was given regarding the third-party inverters it was using. Nikola said it never claimed to have installed its own inverters on prototype vehicles but claimed it was working on its own versions for “quite some time.”

While there were a few items Nikola defended more successfully, notably the value of its existing business contracts and some of the contentious employment decisions that have been made, the refutation didn’t make us feel much better overall. If anything, it seemed to support some of Hindenburg Research’s worst criticisms and really makes it look as though the company got a free ride now that GM is paying it to engineer and build the Badger pickup.

And now for the all-important question, did the short-sellers get their way?

You bet they did. Nikola saw around $5 billion vanish from its market value in the days after the Hindenburg report. It has since been trending back upwards, though has a ways to go before it rebounds from the 25 percent loss it endured since September 8th. We’d feel worse if we didn’t already think Nikola’s share price was wildly overvalued. Until the company starts showcasing more of that advanced technology it’s been yammering on about, don’t expect our opinion to change either. But that doesn’t mean you shouldn’t invest or divest to your heart’s content. The market seems totally exempt from any rational thinking and just barely connected to the real world. Nikola could be worthless or the most valuable company on the planet by the end of September.

[Images: Nikola]

 

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22 Comments on “Nikola Responds to Criticisms of Fraud...”


  • avatar
    SCE to AUX

    Ok, I had not previously seen the video of the white Nikola truck driving around. So they *do* have something – although no hood was raised – but it is clear that the drive motors are electric.

    A delicious irony is the Model 3 parked in the row of employee cars, which stays in frame for quite a while.

    If we assume the truck FCV technology is functional, I’m interested to know what they’re doing about the nightmare hydrogen infrastructure and what their TCO model looks like.

    Edmunds recently had a Mirai as a long-term test car, and their experience refueling it was pretty bad – even in eco-friendly Southern CA. Not only that, its fuel cost as much per mile as a Hellcat.

  • avatar
    jkross22

    This has the feel of the WeWork house of cards to me.

  • avatar
    Vulpine

    The bad news is that Nikola isn’t the first company in this new all-electric market to be called a fraud. The good news is that the other company has pretty well proven those allegations false since they began, 8 years ago. These guys put on a good show but never actually demonstrated a working product whereas that other company produced first a proof-of-concept vehicle that people could actually drive and then went on to produce vehicles for the open market. That other company’s concepts have been validated where Nikola’s have yet to see a truly functional model in operation, of which I am aware.

  • avatar
    Matt51

    Another brilliant move by Mary ‘the crabs’ Barra.

    • 0 avatar
      Luke42

      Oh, give it a rest.

      If you have a problem with GM, please explain what’s wrong with their cars.

      There’s lots to talk about there!

      There’s no need to get personal about the boss-lady.

      • 0 avatar
        Matt51

        Mary the crabs Barra crows about giving $2 billion to Nikola, then the next week the true story on Nikola comes out. Well, as the judge threw out her case against FCA, maybe she can spread some crabs to take her mind off her defeat. If there is “lots to talk about” what’s wrong with GM cars, maybe, just maybe, the “boss-lady” (crab monster?) has some responsibility for that.

        • 0 avatar
          Luke42

          You’re coming across as being obsessed with the fact that she’s female, and insulting her because of that. That’s misogyny.

          Somebody has to call you on the misogyny. If you don’t get called on this stuff, you end up speak for the whole readership of this blog — and that makes me look bad. It has to stop.

          It does look like GM made a mistake with Nikola. It’s not the first mistake GM has made, nor will it be the last. They made big mistakes before Barra, they will make big mistakes during Barra, and they will continue to make big mistakes after Barra. The question is how to avoid and fix the mistakes, not how to make crabs “jokes” about the CEO.

          GM makes mistakes. But, sometimes, they really get it right with a vehicle. And sometimes not.

          Anyway, please stop making the rest the readers of this blog look bad with your comments.

          • 0 avatar
            Vulpine

            One problem with GM is that they’re trying to rebuild the corporation with “halo” vehicles when what they really need to do is improve the design AND QUALITY of existing ones. Quit pandering to the 20% and build for the 80% Of all the pickup trucks GM makes, I chose the Colorado because it was the best looking and effectively smallest of the entire GM truck stable. Clearly the people don’t want what they can afford and can’t afford what they want.

          • 0 avatar
            Matt51

            Mary the crabs Barra gets the same treatment I gave Immelt at GE. Equal treatment is not misogyny buttercup.

    • 0 avatar
      Hydromatic

      Dude, you’ll never be Deadweight. Give it up.

  • avatar
    Cicero

    Today Nikola CEO Trevor Milton explained that the Nikola One was intended to be functional even if it didn’t exactly, you know, function. I guess the good intentions made it okay to publish a video showing it cruising down a highway, apparently fully functional, without disclosing that what the viewer was seeing was actually the world’s largest Pinewood Derby car hurtling motor-free down a very long hill.

    I’m no expert, but it seems like a video like that could mislead a lot of investors.

  • avatar
    13kRPM

    Nikola is just doubling down on their lies. To date, they have not shown one piece of proprietary advanced technology and reports are they only have 7 patents total. Their stock value was not what it was because they were another johnny come lately EV company, but because they made claims of being vastly ahead of many peers in their unique technology.
    Founder Milton was quoted over the weekend as saying that he has never deceived anyone. I ask you is this deceiving:
    You display a hydrogen powered class 8 semi-tractor while making claims it is “fully functional”, has amazing range verified in your testing and that it was developed in secret over several years. The undisputed truth comes out that said truck was thrown together in a few months, was originally designed to be powered by natural gas and that at the time you made those statements it contained electrical sub-systems manufactured by sub-contractors but was completely missing any hydrogen powertrain systems. If that is not deceptive than Mr. Milton, I have a fusion powered truck design to sell you. It only lacks any systems that actually produce fusion. It is a heck of a deal, has a billion-mile range based on your testing standards and is designed to be fully functional.
    Milton is a bald face liar, end of story.

  • avatar
    dukeisduke

    “Nikola Responds to Criticisms of Fraud”

    Criticisms of fraud? The wording makes it sound like the fraud is a fact, and they’re addressing criticism of the fraud.

    Instead, the headline should read:

    “Nikola Responds to Claims of Fraud”

    • 0 avatar
      Vulpine

      @dukeisduke: Well, it seems like Nikola actually admitted to fraud in its response. That suggests that they’re responding to the criticisms of its fraud, yes?

      • 0 avatar
        Luke42

        Yeah, it’s not looking good for Nikola.

        I’ll admit to being a Tesla fanboy, but the more competition that exists in this space, the better. If someone beats Tesla at their own game, the market still wins.

        I’ll take it!

        • 0 avatar
          Vulpine

          I think Rivian, Lordstown, Lucid (maybe) and a couple of the others stand a better chance than Nikola at this time. I think even taking the name Nikola was an intentional dig on Tesla, since the original Tesla of wireless fame is Nikola Tesla: https://en.wikipedia.org/wiki/Nikola_Tesla

          Too many suspicious moves by the Nikola management which suggests a third-party effort to stop Tesla Motors more than develop a true competitor.

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