The Securities and Exchange Commission is looking into claims from a short seller that Nikola Corp is an “intricate fraud” that greatly exaggerated the capabilities of its electric and hydrogen vehicle technology.
A Bloomberg report published Monday indicated the SEC was examining Nikola Corp. to verify the accuracy of the initial Nikola report, which was published by Hindenberg Research. Nikola has also acknowledged that its legal counsel “proactively contacted and briefed” the SEC regarding the Hindenberg Research report and says it “welcomes the SEC’s involvement in this matter.”
The Hindenberg Research report accused Nikola of being “an intricate fraud built on dozens of lies over the course of its Founder and Executive Chairman Trevor Milton’s career.” Nikola allegedly lied that it designs all of its components in-house, with Hindenberg providing an example where Nikola concealed the Cascadia brand label on an inverter with a piece of masking tape. The report also accused the company of misleading investors with its promotional video “Nikola One in Motion” which showed the semi-truck cruising on road at a high rate of speed. This video was actually a ruse, with the company pushing the truck down a hill and then filming them as it rolled down the gradient in the road.
Nikola Corp. CEO Trevor Milton responded to the bombshell report in a rebuttal published on Monday in which he said the allegations by the short seller “are false and misleading, and designed to manipulate the market to profit from a manufactured decline in Nikola’s stock price.”
“Nikola believes 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,” Milton also said in the rebuttal.
While it maintains the Hindenberg report is false, the company did admit that the “Nikola One In Motion” video did not actually show the truck driving under its own power.
“Nikola described this third-party video on the Company’s social media as ‘In Motion,'” the company said. “It was never described as ‘under its own propulsion’ or ‘powertrain driven.’ Nikola investors who invested during this period, in which the Company was privately held, knew the technical capability of the Nikola One at the time of their investment.”
This statement appears to contradict statements made by Milton during the 2016 unveiling of the Nikola One semi in which he said the company had a “chain on the seats to prevent people from coming in,” to the cabin for safety reasons, as they didn’t want someone “to end up doing something and driving this truck off the stage.”
“This thing fully functions and works, which is really incredible,” he said at the time.
GM entered an agreement with Nikola Corp this month to provide the company with its Ultium batteries and hydrogen fuel cell technology for use in the Nikola One, Two and Tre semi-trucks, among other products. The deal will also see GM engineer and manufacture the Nikola Badger pickup truck on behalf of the company. In exchange, GM will receive an 11% stake in the company. The Hindenberg Research report crashed Nikola stock by more than 9% in after-hours trading last week.