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Short circuit – can Nikola become the next Tesla? | Business

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Not if a suspicious short seller has his way


THENE WAY trying to emulate Teslas’ success is naming your company after the same person. Nikola, founded in 2014 to manufacture electric and hydrogen trucks, is, like car maker Elon Musks, named after Nikola Tesla, a Serbian-American electricity pioneer. Nikolas’ market value increased by $ 30 billion after its IPO in June. Some investors have been amazed that a company that isn’t yet selling vehicles could be worth more than Ford, which sold 5.4 million last year. The Nikolas share price fell over the next two months. It jumped again on September 8, after General Motors announced it would take an 11% stake in the company.

This time the euphoria was even shorter. On September 10, Hindenburg Research, an investment firm (named after the airship disaster of 1937) released a report calling Nikola a complex fraud that told an ocean of lies. Nikolas shares lost 36% of their value over the next two days.

Among other things, Hindenburg alleges that Nikolas boss Trevor Milton made misleading statements when he unveiled the Nikola One, a hydrogen-powered electric truck. Mr Milton, Hindenburg said, suggested that a demonstration vehicle could be driven when it was not. A Nikola One shown traveling along a road in a separate video, Hindenburg claimed, was actually driving up a hill with no electricity. The investment firm also ditched Nikolas ‘claims about revolutionary hydrogen and battery technologies, and cast doubt on the expertise of Nikolas’ staff.

Nikola described the Hindenburgs report as successful work motivated by greed. He pointed out that Hindenburg had a short position in Nikolas shares, so it would be profitable if the price of Nikolas shares fell (as Hindenburg acknowledged in his report). On September 14, Nikola released a statement accusing Hindenburg of false and defamatory allegations aimed at manipulating the market. He also appeared to admit that the Nikola One unveiled by Mr Milton could not have been driven and confirmed that the vehicle in the video was indeed not powered. But the firm notes that a newer model, the Nikola Two, has driven several times on its own. It characterized itself as a fledgling company trying to prove its concepts.

On September 11, Mr Milton tweeted a statement that Nikola intended to bring the activist short seller’s actions, along with evidence and documents, to the attention of the WE Security and Trade Commission. September 15, the Wall Street newspaper said the Justice Department was interested in the case. General Motors says it believes in the value we will create by working with Nikola. Nikola himself says that all his other partners stick to it. Investors seem more nervous. The Nikolas share price is down 27% from the day before the Hindenburgs report.

This article was published in the Business section of the print edition under the title “Court-circuit”

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