Tesla executive Martin Viecha has reportedly shared some of the automaker’s short-term goals with investors during an invite-only Goldman Sachs tech conference held in San Francisco on Monday. As the company rarely engages in any form of public outreach and scrubbed its PR department in 2020, leaks from the event immediately became newsworthy.
Nikola Corp. has agreed to pay $125 million to settle charges levied by The Securities and Exchange Commission (SEC) that the company actively defrauded investors by providing misleading information about its technical prowess, production capabilities, and general prospects.
The settlement comes after a salvo of civil and criminal charges were launched against Nikola’s founder Trevor Milton, who got in trouble for convincing investors that the prospective automaker had fully functional prototypes boasting technologies other companies would have envied when that wasn’t actually the case. Milton was chided for using social media to promote false claims about the business, with his pleading not guilty to fraud charges brought up by the Department of Justice in July.
Tesla CEO Elon Musk has sold another 934,091 shares of the company, worth a hefty $1.01 billion, as a way to meet tax obligations related to the exercise of options to buy 2.1 million shares. But it’s just a drop in the bucket, as Mr. Musk’s offloading of Tesla stock has surpassed $10 billion overall. That’s roughly 10.1 million shares since the CEO asked Twitter users at the start of November whether or not he should dump 10 percent of his existing stake in the company following its big move to Texas.
While the tech industry does have firms pushing useful applications and products, it’s quite possibly the most disingenuous business sector of the modern age. Companies selling literally nothing more than false promises routinely see multi-billion-dollar valuations. The necessary hardware is always just “years away” and sold to investors who haven’t realized it was never real in the first place. A significant portion of the industry is also little more than reorganizing payment structures or access to services for the sake of convivence, making sure you’re locked into a plan that keeps your financial and personal details perpetually on file. But sometimes this actually results in worthwhile solutions which may (or may not) be capable of turning a legitimate profit.
Ride-hailing firms are probably one of the earliest and best examples of all the above. Uber and Lyft both lost a lot of money in 2020 but both remain convinced that profitability is just over the next hill. But there are plenty of obstacles littering the incline.
The U.S. Department of Justice has indicted Nikola founder Trevor Milton over claims made to investors that could have been intentionally misleading. Though anybody tracking the story from the beginning already knows the corporate plot surrounding the company’s trucks has more holes than a deli platter comprised entirely of baby swiss.
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.
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.
General Motors announced it will be taking an 11-percent stake in Nikola on Tuesday. It even said it would be actively helping the startup produce the hydrogen/battery-powered Badger pickup, sending the firm’s already-insane share price through the roof. Nikola shares were up 30 percent before the trading day even began, with the General seeing some positive changes in its own stock. Things only improved from there for both companies as news of the partnership continued to spread.
The deal is costing GM $2 billion and allots it one board member of its choosing in exchange for its manufacturing expertise.
Maybe established automakers can impress investors with electric promises, after all. Following Hyundai’s announcement that it will turn the Ioniq nameplate into an electric vehicle brand encompassing several models, the company’s stock lit the afterburners, achieving its best share price showing since 2017.
Lofty electric ambitions aren’t a sure-fire way to juice a stock, as Ford has shown year after painful year, but they can achieve results.
One of the strangest anomalies in the automotive industry is the way electric vehicle startups (like technology companies in general) seem to draw limitless support from investors while established automakers don’t receive nearly the same kind of love — even when transitioning toward EVs.
There’s a logic behind this, however. Green tech is overwhelmingly trendy at the moment, even if some of it lacks a comprehensive game plan to actually save the environment, and financial backers are always looking to get in on the next big thing before anybody else — resulting in scattershot investing that sometimes coalesces into a major victory for new firms possessing sufficient moxie.
But it hasn’t helped the auto industry’s largest players, who are seen as dinosaurs using the blood of their forebears to amass their fortunes. They lack the presumed purity of brands like Tesla or Nikola (clever name), even though their financial goals seem largely the same.
A potential solution to this problem is to distance tech-focused entities from the core business.
Daimler plans to turn up the volume on cost-cutting measures due to operating losses in the second quarter that haven’t officially manifested. CEO Ola Källenius believes the damage caused by the pandemic response will be too severe to proceed with business as usual for the rest of 2020. At the company’s annual meeting, held Wednesday, the CEO told shareholders to anticipate additional measures to protect profits.
“Our previous efficiency goals covered the upcoming transformation, but not a global recession. That’s why we are further sharpening our course,” Källenius said, noting that the company is currently in talks with labor representatives. Considering the automaker enacted a plan bent on reducing its workforce by at least 10,000 to save an estimated €1.4 billion ($1.6 billion) by 2022, we doubt those discussions are super cordial.
PSA Group CEO Carlos Tavares has bucked the notion that his company’s merger agreement with Fiat Chrysler Automobiles needed its terms massaged. Living through the coronavirus should be proof enough that automotive partnerships are essential for weathering the coming economic storm, and that governments shouldn’t stand in the way — or so goes the theory.
During PSA’s annual shareholder meeting on Thursday, the CEO suggested that the poor condition the global auto industry finds itself in makes this a poor time to discuss the issue. Tavares believes the unsavory conditions created by COVID-19 makes cost savings even more vital and that partnering with another automaker is its best bet to stay healthy. “The merger with FCA is the best among the solutions to cope with the crisis and its uncertainties,” he said.
Nikola, the Phoenix-based EV startup that hopped on the Nasdaq last week, finds itself awash in capital despite not having much to show for itself it terms of sellable product.
No matter, as it doesn’t take a sound business model or originality to thrive on Wall Street. Nikola hasn’t even seen fit to come up with a unique moniker for itself and instead uses the scraps left by Tesla Motors’ not using the full name of the inventor that serves as its inspiration. However, Nikola is designing battery/hydrogen-driven semi trailers and pickup trucks — which are the freshest fad in the industry at present. Investors took notice and pushed Nikola’s market cap past $26 billion on Monday. It just kept climbing, too, with only the eventual promise of product and profitability to spur them on.
General Motors CEO Mary Barra went to New York on Wednesday to hold an investor conference. The day’s theme was: convincing everyone that GM deserves a higher valuation because, like Tesla, it’s supposed to be more than a car company.
While it seems slightly presumptuous for GM to expect the same overblown share price when Tesla probably doesn’t deserve it, either, the Good Book is supposed to say something about getting what you ask for. Still, having not read it in a while, I sincerely doubt it was referencing giant corporations or huge amounts of money.
Barra and company are attempting to show that GM hasn’t sat back on electrification and the same kind of advanced automotive technologies that wooed Tesla investors. Nobody said the rival automaker’s name during their speech, of course. Of course, they wouldn’t really need to, either.
Maybe it won’t be needed, what with a new sport-utility vehicle on the way, but Aston Martin’s deflated stock price and profit dive has the British automaker in search of a financial parachute. By that, we mean investors who can pump a little cash into the company while boosting shareholder confidence.
After a disappointing year, Aston Martin needs to chart a path to better finances, and a Chinese company that’s no stranger to endangered European brands might just be that sugar daddy.
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