Nikola stock plummets and CEO resigns amid fraud allegations
It doesn't look great, and it's probably going to get worse before it gets better
Founded in Utah in 2014, Nikola Corporation spent around five years reportedly developing concepts for electric trucks for the North American market. In 2019, the company relocated to Arizona, held a private event to showcase some of the ideas and the concepts and one year later, in March this year, it went public. And that's when things started going a bit wrong a bit quickly.
Hindenburg Research, an organization that specializes in forensic financial research, launched several fraud allegations as they believe, and I'm quoting from their website, "Nikola is an intricate fraud built on dozens of lies" and they claim to have gathered evidence "detailing dozens of false statements [exposing] a level of deception never seen [before] at a public company, especially of this size."
The whole fracas likely began when GM announced their intention to acquire a substantial stake (around 11%) in the company, thus prompting a dazzling rise in stock prices. The company was valued at $13b in August 2020, compared to an $80,000 revenue in the first six months of 2020. It all sounded a bit off and both the US Securities and Exchange Commission and the Department of Justice started looking into the matter.
Unsurprisingly, stock began plummeting. Nikola denied all accusations and Trevor Milton, co-founder and executive chairman of the company, resigned, which of course contributed to even more headlines and more uproar in the stock market. Mr Milton said he would "be cheering from sidelines" but his Twitter account no longer exists. Speaking of which, for the sake of clarity, it must be said that Hindenburg Research is also a short-seller.
The list of allegations made by Hindenburg and situations into which the Department of Justice and the U.S. SEC are looking is long and varied. Now, I wouldn't want to misquote or misrepresent anything so I'll just leave the link here but in short, according to Hindenburg findings, Nikola is claiming to have built several fully-functional trucks when they've all got is a couple of empty shells and elaborate 3D renderings and animation videos, they say they're building everything "in-house" while they're actually out-sourcing most of the components and so and so forth.
My two cents? You know what they say: when it sounds too good to be true, it ain't. Developing battery technology and electric cars is phenomenally expensive and very, very difficult. There's no magic bullet and there's ample evidence to prove that even companies who've been doing this for years with the best facilities are struggling. Tesla, one of the leading companies in battery technologies and EVs, took ten years and over 1 million vehicles to achieve profitability and the fact that VW and Ford, the second and fifth biggest names in the business, had to partner up to share costs speaks volumes.
And let's face it, if there's one thing we know for sure about this is that right now, as we speak, somebody somewhere is taking a bath in dollar bills they made with this stock market anomaly.