Nikola fired back at a scathing report by an analyst with a short position in the company’s stock that accused it of being an “intricate fraud,” denying its findings and retaining a high-profile law firm for a possible legal response. Yet Nikola shares fell further on Friday.
“An activist short-seller whose motivation is to manipulate the market and profit from a manufactured decline in our stock price published a so-called ‘report’ replete with misleading information and salacious accusations directed at our founder and executive chairman,” Nikola said Friday. “To be clear, this was not a research report and it is not accurate. This was a hit job for short sale profit driven by greed.”
The hydrogen truckmaker said it has nothing to hide in and we will refute the allegations. Nikola also hired Kirkland & Ellis LLP, a law firm that often works with automakers, “to evaluate potential legal recourse, including with respect to the activist short seller and any others acting in concert.”
The report, “Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America” by Nate Anderson, a CFA whose Hindenburg Research says it specializes in forensic financial analysis, helped drive an 11% drop in Nikola shares on Sept. 10. Among its accusations, the “breakthrough” battery system Nikola founder and Executive Chairman Milton said the company was working on last year doesn’t exist and the company has claimed to have designed technology and vehicle components purchased from other manufactures as its own. “We have never seen this level of deception at a public company, especially of this size,” Anderson said.
Nikola plunged 17% to $31.30 in morning Nasdaq trading.
The Hindenburg report came two days after Nikola’s surprise news of a far-ranging manufacturing and technological tie-up with General Motors. The largest U.S. automaker’s decision to partner with Milton’s ambitious but unproven startup to build its Nikola Badger electric pickups and supply batteries and fuel cells, while also taking an 11% stake, sent Nikola shares up 41% for the day.
The move boosts the odds Nikola, which won’t generate meaningful revenue for at least two years, can get its heavy-duty electric trucks into production (more or less) on schedule and take Elon Musk’s Tesla Semi in the race to commercialize zero-emission trucking. It also complements Nikola’s previous alliances with companies including Bosch, Meritor, European truckmaker Iveco, Nel Hydrogen and solar panel giant Hanwha.
Nikola’s decision to use GM’s battery system was a surprise because Milton had said last year the company was developing its own new chemistry that would be a breakthrough. On a call Sept. 8 conference call, he said it’s a near-term cost decision to use GM’s Ultium system, though “our next steps will be where I get together with with GM, and the other battery suppliers, and and talk about if (Nikola’s) technology could be utilized or implemented to help them drive down their costs as well.”
Nikola’s core business is to be semi-trucks powered by hydrogen fuel cells and batteries and a network of fueling stations to power them. The hydrogen is to be made by Nikola, relying mainly on electrolysis to extract the element from water using renewable electricity. The company has 14,000 orders for the emission-free trucks, led by beermaker Anheuser-Busch, with plans to begin delivering hydrogen models in 2023. Prior to that, it will sell battery-powered trucks produced with partner Iveco in Europe, and is building a plant in Arizona to produce its Nikola One, Two and Tree models.
“Yesterday, an activist short-seller whose motivation is to manipulate the market and profit from a manufactured decline in our stock price published a so-called “report” replete with misleading information and salacious accusations directed at our founder and executive chairman. To be clear, this was not a research report and it is not accurate. This was a hit job for short sale profit driven by greed.
We have nothing to hide and we will refute these allegations. They have already taken up more time and attention than they deserve. We have retained leading law firm Kirkland & Ellis LLP to evaluate potential legal recourse, including with respect to the activist short seller and any others acting in concert.
Nikola also intends to bring the actions of the activist short-seller, together with evidence and documentation, to the attention of the U.S. Securities and Exchange Commission.
We respect the rights of investors and the integrity of the market and will be back to you after we have advanced the process with the SEC.
Most importantly, Nikola remains focused on delivering on the promises we’ve made to our stakeholders.”