In a world that is growing ever more concerned with the ramifications of climate change, new electric vehicle manufacturers seem to keep popping up. And while it can be difficult to keep all of them straight, you’ve likely heard of Nikola Motors. Perhaps when the company went public back in June to the tune of a $26.3 billion valuation, or when they inked a massive deal with GM earlier this week. Regardless, Nikola has positioned itself as one of the key players in An All Electric Future™. However, a bombshell report from Hindenburg Research suggests that the company has pulled a fast one on everyone.
The Hindenburg Research report suggests that founder Trevor Milton and his company have severely misled investors as to the viability of the EV brand, as well as the proprietary technology that they’ve claimed to be developing. The firm alleges that Nikola faked their way through the entire process, actively working to deceive investors and partners. While the claims have yet to be substantiated, they’ve led the firm to claim they’ve never seen deception at this level at a public company. It is worth noting however that Hindenburg Research themselves are admittedly short sellers. Which means they seek out bear markets, and benefit when stocks tank, and at the moment $NKLA is certainly doing just that.
The news of Nikola potentially being a fraudulent company came just days after the EV automaker signed a technology and powertrain deal with GM, which saw the Detroit automaker secure an 11 percent share in Nikola. The deal will see GM supply the startup with their Ultium battery pack and Hydrotec fuel cell platforms, in return for the stock shares worth an estimated $2 billion. GM will also receive 80 percent of the EV credits that are due to Nikola for their involvement, as well as $700 million in reimbursements related to the manufacturing, distribution and licensing costs.
In other words, General Motors gets credits to help offset their V8-powered vehicles that are in high demand, and will make money on supplying major technology to Nikola. GM also has the option to take a seat on the Nikola board, and should contribute to seeing the pre-revenue company to success, and could cash out of the investment by 2025.
Regardless of the high-stakes investment in part of General Motors, the Hindenberg report resulted in some serious backsliding for the Nikola stock, which some might see as a calculated move. Despite the very public chaos, GM is standing by their decisions to partner with the EV manufacturer, although is ultimately playing the silent card in a time where investors are seeking clarity.
Sell-side analysts immediately began to ask what GM could be getting from this deal before such accusations were ever brought forth. None of the tech the company has promised has really materialized, and signing on to use GM’s tech almost guarantees it never will. But it also means that it doesn’t have to.
In a statement to Roadshow, a Nikola spokesperson outlined the following:
“Nikola has been vetted by some of the world’s most credible companies and investors. We are on a path to success and will not waver based on a report filled with misleading information attempting to manipulate our stock.”
Various suppliers have also chimed in, such as Bosch, whom is a key player in Nikola’s drivetrain components.
“Specific instances in the report quoting a Bosch employee were taken out of context. He spoke only about Bosch’s own plans for the IAA industry show and H2Haul project for the European Union,” said a Bosch spokesperson, also to Roadshow. Meanwhile, major companies, such as Anheuser-Busch, have already placed major orders for Nikola semi trucks. But these orders can be canceled at-will.
The world has gone crazy for Teslas (compared to other electric vehicles). There is no denying that the brand has dominated the EV segment, and has shaped the way we view these businesses. Despite all of the very real issues that people have pointed out about the California automaker, its value is currently higher than all of the Detroit automakers combined. And Disney. And Coke-a-Cola. So it’s clear then that investors and executives across the board are looking for a bit of this action.
Nikola looked to be a promising contender in the space, with a name that perfectly sneers at Elon’s company. However, in the end it may be the South African who is laughing, should Nikola really turn out to be nothing more than another Theranos.