By on September 11, 2020

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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39 Comments on “Scathing Report Accuses Nikola of Fraud...”

  • avatar
    R Henry

    Those who “invest” in such firms well and truly deserve the haircuts they will receive. No sympathy here.

    How long until investors stop dreaming that this company, or the next, will “be the next Amazon?”

    • 0 avatar

      The CEO of the first company I worked for had a mantra – “never trust anyone with an axe to grind”.

      In this case, I have no axe to grind at all. I’m not invested in Nikola or GM, nor am I a client of Hindenburg.

      Nikola may be a fraud, I have no information on that. It is nonetheless reality that Hindenburg has a large short position in Nikola, so they only make money if the stock goes down, and the lower it goes the more money they make. On the other hand, if the stock goes up, they lose. So if GM’s investment raises Nikola’s stock price, it’s in Hindenburg’s interest to trash the stock so they can cash out at minimal loss.

      There are no heroes here, only villains who can’t be trusted. So don’t trust any of them.

      • 0 avatar

        @ect: Well said. You can’t trust any of them. I’ve even seen op-eds in major publications where there are undisclosed connections of the author to entities with some sort of financial stake in the subject of the article. Then SEC needs to crack down when it involves stock manipulation.

        In Hindenburg’s defense, they seem to be primarily crusaders against scam artists and crooks. I think they are doing some good things. They have to make money to support their activities and the shorting is a good way to do that. They seem like financial industry bounty hunters making money off of bad guys they catch. I’m okay with that. The SEC isn’t doing anything, so why not send in the bounty hunters?

  • avatar

    The company name “Nikola” is like one of those fake brand names in movies, that hints so strongly, everyone knows exactly who it’s supposed to be.

  • avatar

    Just show the truck moving by its own means. That’ll be it. Anything other than that will only show Nikola is all BS.

  • avatar

    My guess is that if they could show the truck moving under its own power, they already would have. Another website that had an article yesterday about this same issue also showed that, for all their alleged innovation and proprietary technology, the company owns a total of 7 US patents. Seven. It sounds like they’re going to put their own bodies on GM’s upcoming EV truck chassis, and, since GM is building the trucks for Nikola, they get to utilize all the $7500 federal government credits Nikola has available. That’ll help keep that assembly line rolling!

    • 0 avatar

      They don’t even make truck bodies. They contracted with a fab company to put the body on the pusher truck. All they own are some pretty drawings. Remember GM didn’t pay anything – they’ve been given stock ownership, which is worth a lot less today than it was earlier in the week.

    • 0 avatar

      Huh, suddenly both this and the Workhouse deal with GM make sense.

      I guess they figure since they blew all their EV credits on the bolt, they’ll just keep “partnering” with various shell companies until the EV credits run out on each one. Not a bad strategy, honestly.

      • 0 avatar

        Until the sham of EV credits is shut down, it’s the best way for a traditional automaker to stay in business. It seems the primary purpose of virtually every environmental requirement and regulation is to punish those “big, bad” corporations.

  • avatar

    Next thing you know they’ll be claiming that the trucks will drive themselves! Ludicrous!

  • avatar
    SCE to AUX

    Agreed with the others. A working prototype (using the actual propulsion method Nikola claims) would be something.

    At this point, the entire company is vaporware based on artists’ renditions.

  • avatar

    “No you’re not!” said Little Nikola

  • avatar
    Mike Beranek

    I’m beginning to wonder if anyone in the big-business community can be trusted anymore.

  • avatar
    schmitt trigger

    Its the herd mentality.

    The automotive environment got a big fleecing during this pandemic, with the exception of Tesla.
    Therefore everyone is rushing towards electrification, with fear- better make that terror, of missing out.

  • avatar

    Speaking as someone who was employed in tech in Silicon Valley during the dot-bomb era and lost his job because of it: why is anyone surprised that these companies are over-valued?

    In the year 2000, money was being poured into pretty much any company that could say that they were going to do something, anything, involving the Internet. In 2020, the same thing is happening with ‘green’ tech. That can only happen for so long before investors and venture capitalists want to see a return on their money as opposed to a revival of the term ‘burn rate’.

    What will be interesting to see is if, when the current bubble eventually bursts, the companies affected will be allowed to fail or if the taxpayer will end up bailing them out because eco-friendly.

  • avatar

    Given that the GM deal calls for GM to design and manufacture the Badger pick up using GM’s tech, I’d say this investor is onto something.

  • avatar

    a) Congratulations to GM and Nikola on finding the business partner they each deserve.
    b) These guys make Tesla look pretty good by comparison, no?
    c) Hindenburg Research seem intelligent and motivated – they should introduce an electric vehicle.

    • 0 avatar

      c) Hindenburg Research seem intelligent and motivated – they should introduce an electric vehicle.

      Maybe they’d be more interested in hydrogen?

      • 0 avatar

        The “About Us” section of their website indicates a distinct aversion to hydrogen in transport applications.


        Why “Hindenburg”?
        We view the Hindenburg as the epitome of a totally man-made, totally avoidable disaster. Almost 100 people were loaded onto a balloon filled with the most flammable element in the universe. This was despite dozens of earlier hydrogen-based aircraft meeting with similar fates. Nonetheless, the operators of the Hindenburg forged ahead, adopting the oft-cited Wall Street maxim of “this time is different”.

        We look for similar man-made disasters floating around in the market and aim to shed light on them before they lure in more unsuspecting victims.

        • 0 avatar

          “totally avoidable”

          At that time Germany had the choice of hydrogen or nothing. They had no source for helium. They would have had to get helium from the US. And, the US had told them no.

          How I like to picture the Hindenberg is almost 5 million cubic feet of hydrogen with a smoking lounge. What chutzpah!

        • 0 avatar

          “It is not a balloon, it is an airship! Go outside and see!”

          – “AAAAARRRGGGHHH!”

          (“The Golden Age of Ballooning”, Monty Python’s Flying Circus)

  • avatar

    GM’s MO is to be hosed by partners. Exhibit one: FIAT deal. GM should better donated $2 bils to Bureau of Land Management.

    • 0 avatar

      I’m not sure the Bureau of Land Management would approve of two dollar bills. Maybe three dollar bills would be more in keeping with their philosophy. Today it is one eternal truth, and tomorrow a different eternal truth. But, it is always the same eternal truth. Or in the words of the great sage: “I think that there’s a lot of people more concerned about being precisely, factually and semantically correct than about being morally right.”

      • 0 avatar

        $2 is actually collectible and is highly sought after. I’m sure soon there will be BLM edition too with all Bureau leaders crafting the new constitution featured in the back.

        • 0 avatar

          Golly, I can hardly wait to see their new constitution. I’m sure it will be very enlightened and, once and for all, solve all of personkinds problems. I await with baited breath!

          I liked the old US bills better than the new ones. The new ones look like play money and the pictures of the dead presidents are scary big.

          • 0 avatar

            The new constitution will establish one party system (finally catching up with Russia! US always was socially backward.) and free stuff for everyone.

            BTW I did not no see dollar bill for a long long time. But since soon everything will be free there will be no need for money. Money under new BLM constitution will be abolished. If you need something, say big TV screen you just go to Best Buy and grab one. Today it is called looting but in the new America it will be God given birthright. The overarching tenet of the Bureau of Land Management is the abolishment of class, money and state. All people are granted the basic necessities like iPhone and luxury cars of your choice and are free to pursue happiness without restraint. Isn’t that wonderful?

          • 0 avatar

            “I liked the old US bills better than the new ones.”

            Millions of valid old US currency is still in circulation outside of the US.

            While in Old Mexico recently I got an old dollar bill that was printed in the 1950s. It was a valid bill; I ran it through my Accubanker D64 and looked for the watermarks as well.

            I’m going to take ~$10K in folding US money with us to Israel when we go there after the China virus is beaten. I did that the last time we went there too, and spent every single bill I had with me while there.

            People around this planet will scarf up US currency like there is no tomorrow because it is the only currency accepted everywhere, and without penalty.

            I have yet to find anyone in the US willing to accept my growing collection of Euros, Rials, Yen, Pesos, or even Canadian coins.

    • 0 avatar

      “Isn’t that wonderful?”

      Of course it’s wonderful! But, I was kinda hoping that the stores could put a piece of glass and a little hammer next to the expensive stuff so it could feel more like the good old days. Don’t want to lose that adrenaline rush of the old smash and grab.

      • 0 avatar

        No need to break windows – all stores will be owned by state and Party and will have open doors policy 24×7. Even though it is much more fun to break the window than enter though door. To make people happy Party will provide both options. You can also tear down the wall or roof or both and set a fire of course. Under new democratic constitution you will be entitled to the freedom of expression.

        • 0 avatar

          OK. I’ll put the freedom of expression right next to the white privilege on the mantle over the fireplace in the billiard room.

          I can hardly wait for the Great and Glowing Future (GGF). No matter what the sacrifice I will work tirelessly for the GGF (that never arrives). It’s making me tired already.

    • 0 avatar

      I’ll bet Mary Barra also answers those fake calls from “Amazon”, and gives them her credit card numbers.

      • 0 avatar

        I answered the cal from “microsoft” about there being a virus on my computer. I kept the guy on the other end on for at least a half hour. I don’t think he ever realized I was just jerking him around.

        Actually if everybody started doing the same thing with these scumbags it might help put them out of business

  • avatar

    Tulip madness

  • avatar

    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.

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