Nikola Responds to Criticisms of Fraud

Matt Posky
by Matt Posky

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]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • 13kRPM 13kRPM on Sep 15, 2020

    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.

  • Dukeisduke Dukeisduke on Sep 15, 2020

    "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"

    • See 2 previous
    • Vulpine Vulpine on Sep 15, 2020

      @Luke42 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.

  • Varezhka I have still yet to see a Malibu on the road that didn't have a rental sticker. So yeah, GM probably lost money on every one they sold but kept it to boost their CAFE numbers.I'm personally happy that I no longer have to dread being "upgraded" to a Maxima or a Malibu anymore. And thankfully Altima is also on its way out.
  • Tassos Under incompetent, affirmative action hire Mary Barra, GM has been shooting itself in the foot on a daily basis.Whether the Malibu cancellation has been one of these shootings is NOT obvious at all.GM should be run as a PROFITABLE BUSINESS and NOT as an outfit that satisfies everybody and his mother in law's pet preferences.IF the Malibu was UNPROFITABLE, it SHOULD be canceled.More generally, if its SEGMENT is Unprofitable, and HALF the makers cancel their midsize sedans, not only will it lead to the SURVIVAL OF THE FITTEST ones, but the survivors will obviously be more profitable if the LOSERS were kept being produced and the SMALL PIE of midsize sedans would yield slim pickings for every participant.SO NO, I APPROVE of the demise of the unprofitable Malibu, and hope Nissan does the same to the Altima, Hyundai with the SOnata, Mazda with the Mazda 6, and as many others as it takes to make the REMAINING players, like the Excellent, sporty Accord and the Bulletproof Reliable, cheap to maintain CAMRY, more profitable and affordable.
  • GregLocock Car companies can only really sell cars that people who are new car buyers will pay a profitable price for. As it turns out fewer and fewer new car buyers want sedans. Large sedans can be nice to drive, certainly, but the number of new car buyers (the only ones that matter in this discussion) are prepared to sacrifice steering and handling for more obvious things like passenger and cargo space, or even some attempt at off roading. We know US new car buyers don't really care about handling because they fell for FWD in large cars.
  • Slavuta Why is everybody sweating? Like sedans? - go buy one. Better - 2. Let CRV/RAV rust on the dealer lot. I have 3 sedans on the driveway. My neighbor - 2. Neighbors on each of our other side - 8 SUVs.
  • Theflyersfan With sedans, especially, I wonder how many of those sales are to rental fleets. With the exception of the Civic and Accord, there are still rows of sedans mixed in with the RAV4s at every airport rental lot. I doubt the breakdown in sales is publicly published, so who knows... GM isn't out of the sedan business - Cadillac exists and I can't believe I'm typing this but they are actually decent - and I think they are making a huge mistake, especially if there's an extended oil price hike (cough...Iran...cough) and people want smaller and hybrids. But if one is only tied to the quarterly shareholder reports and not trends and the big picture, bad decisions like this get made.
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