Scathing Report Accuses Nikola of Fraud

Matt Posky
by Matt Posky
scathing report accuses nikola of fraud

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]

Comments
Join the conversation
2 of 39 comments
  • Lightspeed Lightspeed on Sep 14, 2020

    Tulip madness

  • Schurkey Schurkey on Sep 16, 2020

    It's a leftist, politically-correct, non-viable technology EV. OF COURSE there's fraud involved. The news story here would be finding something--anything--that ISN'T fraudulent. Man bites dog sort of news. Greenie dirtbags. Never in the history of the world has there been a shortage of nut-jobs, mental-defectives, or swindlers.

  • Nrd515 I bought an '88 S10 Blazer with the 4.3. We had it 4 years and put just about 48K on it with a bunch of trips to Nebraska and S. Dakota to see relatives. It had a couple of minor issues when new, a piece of trim fell off the first day, and it had a seriously big oil leak soon after we got it. The amazinly tiny starter failed at about 40K, it was fixed under some sort of secret warranty and we got a new Silverado as a loaner. Other than that, and a couple of tires that blew when I ran over some junk on the road, it was a rock. I hated the dash instrumentation, and being built like a gorilla, it was about an inch and a half too narrow for my giant shoulders, but it drove fine, and was my second most trouble free vehicle ever, only beaten by my '82 K5 Blazer, which had zero issues for nearly 50K miles. We sold the S10 to a friend, who had it over 20 years and over 400,000 miles on the original short block! It had a couple of transmissions, a couple of valve jobs, a rear end rebuild at 300K, was stolen and vandalized twice, cut open like a tin can when a diabetic truck driver passed out(We were all impressed at the lack of rust inside the rear quarters at almost 10 years old, and it just went on and on. Ziebart did a good job on that Blazer. All three of his sons learned to drive in it, and it was only sent to the boneyard when the area above the windshield had rusted to the point it was like taking a shower when it rained. He now has a Jeep that he's put a ton of money into. He says he misses the S10's reliablity a lot these days, the Jeep is in the shop a lot.
  • Jeff S Most densely populated areas have emission testing and removing catalytic converters and altering pollution devices will cause your vehicle to fail emission testing which could effect renewing license plates. In less populated areas where emission testing is not done there would probably not be any legal consequences and the converter could either be removed or gutted both without having to buy specific parts for bypassing emissions. Tampering with emission systems would make it harder to resell a vehicle but if you plan on keeping the vehicle and literally running it till the wheels fall off there is not much that can be done if there is no emission testing. I did have a cat removed on a car long before mandatory emission testing and it did get better mpgs and it ran better. Also had a cat gutted on my S-10 which was close to 20 years old which increased performance and efficiency but that was in a state that did not require emission testing just that reformulated gas be sold during the Summer months. I would probably not do it again because after market converters are not that expensive on older S-10s compared to many of the newer vehicles. On newer vehicles it can effect other systems that are related to the operating and the running of the vehicle. A little harder to defeat pollution devices on newer vehicles with all the systems run by microprocessors but if someone wants to do it they can. This law could be addressing the modified diesels that are made into coal rollers just as much as the gasoline powered vehicles with cats. You probably will still be able to buy equipment that would modify the performance of a vehicles as long as the emission equipment is not altered.
  • ToolGuy I wonder if Vin Diesel requires DEF.(Does he have issues with Sulfur in concentrations above 15ppm?)
  • ToolGuy Presented for discussion: https://xroads.virginia.edu/~Hyper2/thoreau/civil.html
  • Kevin Ford can do what it's always done. Offer buyouts to retirement age employees, and transfers to operating facilities to those who aren't retirement age. Plus, the transition to electric isn't going to be a finger snap one time event. It's going to occur over a few model years. What's a more interesting question is: Where will today's youth find jobs in the auto industry given the lower employment levels?
Next