- Nikola short-seller Hindenburg Research has alleged that the electric-truck startup “is an intricate fraud built on dozens of lies.”
- Nikola denied many of Hindenburg’s claims, but conceded some of them, including two instances in which it created the impression that non-operational truck prototypes could drive under their own power.
- Though Nikola’s stock price has fallen since Hindenburg published its allegations, financial analysts from three firms have said or indicated that their opinion of the company hasn’t changed.
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A scathing report from a short-seller firm may have sent Nikola‘s stock price tumbling, but for three financial analysts, the report hasn’t fundamentally changed how they think about the electric-truck startup.
“While we look forward to management addressing some of these issues, we continue to believe seeing the forest through the trees,” WedBush Securities said in a September 14 note.
On September 10, Hindenburg Research said an examination of Nikola and its founder, Trevor Milton, had uncovered a history of alleged misrepresentations and encouraged the firm to sell short Nikola’s stock, which amounts to a bet that its price will fall.
“We believe Nikola is an intricate fraud built on dozens of lies over the course of its founder and executive chairman Trevor Milton’s career,” Hindenburg said.
Nikola is developing electric, heavy-duty trucks powered by batteries and hydrogen fuel-cells, as well as a network of hydrogen fueling stations. The company plans to offer customers leases that include vehicles, fuel, and maintenance.
Many of the Hindenburg report’s claims center on alleged exaggerations made by Milton and the company about the capabilities of its vehicles, the amount of technology Nikola has developed in-house, and its progress on key goals, like significantly reducing the cost of hydrogen.
Nikola denied many of the report’s claims, but conceded some of them, like two instances in which the company created the impression that non-operational prototypes of its Nikola One semi-truck could drive under their own power.
In one case, the company posted a video of a prototype that appeared to be driving but was instead rolling down a low-grade hill. Though the video’s description said only that the vehicle was “in motion,” it didn’t specify that the vehicle was relying on gravity to move.
Financial analysts haven’t put much stock in the Hindenburg report
WedBush Securities, which published its note before Nikola issued its full response to the Hindenburg report, didn’t express concern about the report’s allegations, saying Nikola has a massive opportunity if it can execute on its plans and highlighting the company’s partnership with General Motors, which will engineer and build the startup’s Badger pickup truck.
“Despite the loud bear noise this week we continue to believe the GM partnership is a huge shot in the arm for Nikola and cements credibility not just for its Badger production slated to begin by the end of 2022 but for its hydrogen fuel-cell ambitions and semi-truck vision going forward,” WedBush said.
JPMorgan analysts described a conversation with Nikola CFO Kim Brady in a September 16 note, saying they found Brady’s comments “reassuring.” Brady told the analysts that Nikola’s employees, suppliers, partners, and potential customers “remain engaged” with the company following the Hindenburg report. JPMorgan has given Nikola an “overweight” rating, which means it expects the company’s shares to outperform the average return of the other companies its IT hardware and alternative-energy analysts cover over the next six to 12 months.
Peter McNally — Third Bridge’s industrials, materials, and energy lead — said in an interview with Business Insider that he had doubts about Nikola before the Hindenburg report was published and that the report didn’t have an impact on his perception of the company, though he noted that the 2018 video of the Nikola One rolling down a hill raised questions about the company’s ability to execute.
McNally said he’s skeptical of Nikola for two primary reasons: It has not been proven that hydrogen fuel-cells can meet the long-term performance demands of heavy-duty trucks, and Nikola is projecting it will earn profit margins that are much higher than trucking rivals like Paccar.
“Fuel cells work. They’ve worked for decades,” McNally said. “It’s actually finding them in an application like this that nobody has successfully done before.”
Nikola declined a request for comment.
Are you a current or former Nikola employee? Do you have an opinion about what it’s like to work there? Contact this reporter at firstname.lastname@example.org, on Signal at 646-768-4712, or via his encrypted email address email@example.com.
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