Within Days Of Being Touted As The Next Tesla, Electric Truck Startup Nikola Faces Charges Of Fraudulent Misrepresentation
Within days of being touted as the next Tesla and General Motors picking up a 11% stake in the company, Arizona-based electric car startup Nikola Corp is facing allegations that it used a vehicle rolling downhill in a marketing video and passed off technology purchased from a supplier as its own in its early model.
Nikola specializes in building zero-emission semi trucks using battery or hydrogen fuel cell technology, but it recently introduced its Badger pickup truck for consumers.
Last Tuesday (Sep 8), shares of Nikola surged 53% after General Motors announced it’s taking an 11% stake in the electric truck maker and will collaborate with the startup to produce its marquee hydrogen fuel cell electric pickup truck the Badger by the end of 2022. Under the deal, GM will also become the exclusive supplier of fuel-cell technology for Nikola's upcoming Class 7 and 8 semi trucks.
In a scathing report it released last Thursday (Sep 10), short-seller Hindenburg called Nikola an “intricate fraud,” alleging that the company made widespread false statements and several misleading claims about its technology.
Hindenburg said that it has gathered extensive evidence—including recorded phone calls, text messages, private emails and behind-the-scenes photographs—detailing dozens of false statements by Nikola Founder Trevor Milton. The short-selling firm also added that it never seen this level of deception at a public company, especially of this size.
The report accused Nikola of staging a video called “Nikola One in Motion” which showed the semi-truck cruising on a road at a high rate of speed. “Our investigation of the site and text messages from a former employee reveal that the video was an elaborate ruse—Nikola had the truck towed to the top of a hill on a remote stretch of road and simply filmed it rolling down the hill.” the report noted.
Since the publication of Hindenburg report, the shares of the startup fell by a whopping 40%.
In a lengthy rebuttal issued yesterday (Sep 14), Nikola rubbished the allegations and termed the report “false and misleading”. Nikola said it has contacted the Securities and Exchange Commission, as it believes the Hindenburg report was designed to manipulate the market.
In its respose, Nikola did not dispute that a 2018 promotional video giving the impression of a self-driving truck in action actually just showed the truck rolling downhill. Nikola “never stated its truck was driving under its own propulsion in the video,” the company said.
Nikola also calimed that the Hindenburg report, and the opportunistic timing of its publication shortly after announcement of Nikola’s partnership with General Motors Co. and the resulting positive share price reaction, was designed to provide a false impression to investors and to negatively manipulate the market in order to financially benefit short sellers, including Hindenburg itself.
Nikola also said it had “proactively contacted and briefed” the SEC about Hindenburg’s report, claiming it was designed to manipulate the market to benefit short sellers. In a statement, Nikola said it “welcomes the SEC’s involvement in this matter.”
The company also said that during 2021it will begin testing a pre-production version of Nikola Two, a hydrogen-electric powered semi-truck for the medium and long-haul trucking sectors, with more than 1,000 horsepower and 2,000 ft. lbs. of torque.
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