
Nikola Denies 'Fraud' Allegations, Threatens Legal Action Against Short-Sellers - tomohawk
https://www.thedrive.com/tech/36357/nikola-denies-fraud-allegations-threatens-legal-action-against-short-sellers
======
reitzensteinm
I don't understand Nikola at _all_. There are so many red flags, yet large
credible companies appear to be willing to partner with them and buy from
them. I suspect the terms are probably quite one sided, but even then there's
reputation risk for partnering with the next Theranos.

I listened to the CEO talk for an hour about their dedicated route hydrogen
business model for trucking, and it actually seems like a good idea. The
thesis is that 25% of trucks drive back and forth on the same route for their
entire lifetime, so you pick the busiest route, build a hydrogen station on
it, and sell a bunch of trucks to use it at capacity.

This avoids the chicken and egg problem of building thousands of stations
everywhere before you can sell your first vehicle.

I don't know anything about the industry, and I wouldn't trust their ability
to execute, but the plan itself seems sensible. As the renewable grid share
increases, there's going to be a bunch of excess capacity at times that can be
used very cheaply, meaning the end to end efficiency of hydrogen may not be a
deal breaker. Without a multiple of current battery energy density, long range
BEV trucking will be tough.

Then there's the Badger/GM partnership. They got Iveco to make their trucks,
and now they're getting GM to make their pickup. It makes me wonder if their
strategy is going to be permanently outsource manufacturing and try to be a
Pepsi to Tesla's Coke, partnering with traditional manufacturers which are
able to build vehicles technically, but lack the modern sexiness of the new
crop of BEV car makers.

But if they do pull any of this off, it's going to go down as one of the
greatest fake it til you make it examples in modern history. They probably did
bullshit their way in to this market cap - I wouldn't be surprised if every
word of the short seller report is true. But the market cap does opens doors.

~~~
samfisher83
This is the next Theranos. Theranos got walgreen and safeway to sign
partnerships with them too. US xpress doesn't have the capital to buy the
number of truck Nkla is claiming. They don't have a working prototype. Nobody
on their Management team seems to have the background to invent a cell that
they are claiming.

Wish the SEC would do their job before the Milton guy hides all his money.

~~~
CydeWeys
The crazy part is how a hacked-together prototype wouldn't even be _that_ hard
for a company the size of Nikola. Trucks already exist. So too do hydrogen
fuel cells, electric motors, batteries, and high pressure gas tanks. Just take
all those components and hack them together into a working first generation
prototype truck, and get some on the road.

Tesla did a great job of this in its earliest years on far less funding than
Nikola has now. They took existing cars (Lotus Elises) and all they had to do
was put in batteries and electric engines. You have to walk before you can
run, which Tesla did and Nikola seems to be failing to do. Jumping straight to
building an entire truck is lunacy.

~~~
ashleyn
Counterpoint: Elon, in retrospect, called the Lotus Elise strategy "super
dumb." [1]

1: [https://www.forbes.com/sites/jeanbaptiste/2018/09/18/elon-
mu...](https://www.forbes.com/sites/jeanbaptiste/2018/09/18/elon-musk-
converting-lotus-elise-to-build-the-tesla-roadster-was-a-super-dumb-
strategy/#b39b12d540fe)

~~~
syspec
That may be true, for practical reasons, but it gave Tesla that "sexy" car
image right off the bat.

That was probably invaluable, because their next cars kind of looked like
boring sedans yet the image persisted

------
itsoktocry
Can anyone name a single, legitimate company that has ever been "taken down"
by short-sellers? A company which had a great business going, but short-
sellers ruined it? I don't even think it's possible.

On the other-hand, frauds brought down by journalists and short-sellers are
abundant.

In my experience, CEOs (in this case, the board Chairman) whining about
traders is a huge red flag. What do they care what a bunch of people are doing
with their ownership in the company? It's irrelevant to the day-to-day
operations of the company, but certainly harms the narrative.

~~~
marvin
Problem is, it's almost impossible to know unless you're there. Companies that
are dependent on financing might not get financing if loud short sellers are
able to change the narrative, and then fail to achieve goals that would be
achievable if investors were on board. I don't know enough history to know
concrete candidates, but I'd be very surprised if no company had ever been
stopped from achieving a good trajectory by short sellers and other naysayers
changing the perceptions of investors. Yes, there is a value in short selling
as a market mechanism to detect fraud and correct incorrecly priced companies,
but it's naïve to think it doesn't also incentivize destruction of initiatives
that are actually valuable.

I _did_ follow the short campaign against Tesla closely from 2014-2018. And
that project was vicious. I could easily see it toppling a less-financed
company, or one where the quality of their engineering was less obvious. And
trust me, although things might look black and white in retrospect, there was
nothing obvious about Tesla's success in 2014. The indications were pretty
clear if you followed it closely, but this reality was in very sharp contrast
with the narrative. I believe it was a closer call than most would believe in
reterospect.

Comparisons with Nikola nonwithstanding, I believe you're wrong about loud
short sellers in general not being able to destroy the prospects of a company
that would succeed in their absence.

~~~
AnthonyMouse
It's also fairly trivial to see that it's possible to destroy some companies
this way simply by noting that some companies succeed and some companies fail,
which implies that there exist companies at the margin whose success or
failure depends on things like financing availability or interest rates.

Moreover, companies in that position are exactly those with the greatest
profit potential for short sellers. Companies that are obviously going to
succeed or already have aren't likely to decline in value in the near future.
Companies that are obviously going to fail will have declined in value
already.

The largest opportunity for short sellers is when there is that uncertainty,
because then you have a company walking a tightrope and there are people
willing to bet that they make it to the other side. The short sellers can take
their money and then give the company a hard shove and hope that it makes them
fall.

~~~
itsoktocry
> _The largest opportunity for short sellers is when there is that
> uncertainty, because then you have a company walking a tightrope and there
> are people willing to bet that they make it to the other side._

Provide an example of this happening.

Judging by many of these comments, I'm not sure some people here understand
the mechanics of how selling shares short actually works. It does not,
defacto, destroy _any_ value in the company.

~~~
AnthonyMouse
> Provide an example of this happening.

There's a pretty good case that they were trying to do this to Tesla. We heard
all these claims about how nobody was really buying their cars and so on,
which turned out to be bullocks, but were being made at a time when they were
in a precarious financing situation.

But the general problem with asking for examples is that nobody has the inside
information necessary to verify them. I can point to any company that went
bankrupt following negative media coverage at the behest of short sellers, but
how is anybody supposed to prove whether or not they would have survived in
the alternative?

> Judging by many of these comments, I'm not sure some people here understand
> the mechanics of how selling shares short actually works. It does not,
> defacto, destroy _any_ value in the company.

Are you sure you know how short selling works? Short sellers borrow shares in
the company and then sell them, which temporarily increases the supply of
shares on the market and suppresses the price. If the company at that point
issues new shares or wants to borrow money against the value of their stock,
it costs them money, i.e. reduces access to capital or requires them to pay
higher interest rates, which negatively impacts the business.

And that's just the result of the actual short selling, not including the
reputational harm caused by false allegations (or over-hyped technically true
allegations), which can reduce demand from not only investors but the
business's customers.

------
ahelwer
CEO claiming all the allegations are false, factual refutations _totally_
exist, but they can't publish those refutations until the SEC "finishes their
job". What a scam artist. Always some excuse, always delays, just milking the
fraud as long as possible.

~~~
xenospn
Sounds exactly like trump “not releasing his taxes because they’re under
audit”. I guess they both read the same book.

------
llboston
I have no insider info but leaning to believe that at least Hindenburg
Research's report is partially correct based on a few things:

1\. I listened to Nikola founder Trevor's interview on Jason Calacanis's
podcast, and was sold on the advantage of Hydrogen fuel cell over battery for
long haul trucks. Such a huge market! And then Trevor said Nikola, a 400
people company, are also working on the an electric pickup called Badger to be
more consumer facing. This makes no biz sense to me at all and I realized they
are probably just chasing the trend.

2 At the time Nikola doing the first Earnings call ever, Trevor was on a 6-day
vacation in the Bahamas, while bragging about having a $13 Million airplane.
Trevor is no Elon. No matter how much you hate Elon, he works his butt off,
and that gets my respect automatically.

3 I understand Nikola want to protect their trade secrets and go through SEC
first, but in their press release [2] they have shown nothing to prove that
Hindenburg Research's report is wrong.

[1] [https://thisweekinstartups.com/e1090-nikola-founder-
trevor-m...](https://thisweekinstartups.com/e1090-nikola-founder-trevor-
milton-on-competing-with-tesla-hydrogen-over-battery-going-public-as-a-pre-
revenue-company-more/)

[2] [https://nikolamotor.com/press_releases/nikola-refutes-
allega...](https://nikolamotor.com/press_releases/nikola-refutes-
allegations-95)

~~~
bfieidhbrjr
The SEC thing is a smokescreen. There is no reason to go to or via the SEC for
their rebuttal, if anything they're just trying to get ahead of the PR
nightmare of the SEC going to them.

Them staying silent and sending info to the SEC is a big red flag, but to the
lay investor it looks good, which is why they did it.

------
aazaa
There's a simple antidote to the claims: ship products. The company appears to
have trouble doing this, and AFAICT has not shipped a single production
vehicle.

Nikola should focus on that, not trying to levitate the company's share price
higher by jawboning.

The comparison to Theranos is apt in that the response of that company was to
jawbone rather than ship.

~~~
cultus
They could completely discredit the Hindenberg report simply by release a
video of the truck clearly driving under its own power. They haven't, and
instead are just issuing these legal threats against shorters.

This hysteria against short sellers in some circles is great for hiding fraud.
Wirecard also comes to mind.

~~~
postingawayonhn
They do have drivable prototypes now (of the Two, not the One) and there's
plenty of videos. How well designed/built they are is another question.

~~~
cultus
If they are lying about the drivability of One (which they almost certainly
are), what does that say about Two? They've fairly obviously faked other tech,
including covering up an OEM logo on an ostensibly original piece of tech with
duct tape.

------
ceejayoz
> Milton indicated that the company will provide no further in-depth public
> comments until the SEC "finishes their work."

How about showing media outlets the truck going _up_ that 3% grade from a cold
start?

Or showing the solar panels on the company’s roof?

Many of the allegations would be trivial to disprove, if they are in fact
false, and doing so seems unlikely to anger the SEC.

~~~
pas
Did they indicate that that truck was a proper real thing, and their future
trucks will be at least that capable? Or it was just a concept car, like what
automakers used to do for decades?

~~~
ceejayoz
[https://www.youtube.com/watch?v=IAToxJ9CGb8](https://www.youtube.com/watch?v=IAToxJ9CGb8)
has the headline "Nikola One Electric Semi Truck in Motion", and shows with
camera angles implying it goes uphill.

Lots of frauds are done this way - trying to pull the "well, we didn't exactly
_say_ what you think we did". It remains fraud.

~~~
Shivetya
It is more interesting to me there are no newer videos than this 2018 showing
towing but they do have a video of one with look through
[https://www.youtube.com/watch?v=7LSrvRMgIqw](https://www.youtube.com/watch?v=7LSrvRMgIqw)

so I guess it comes down to this, if they want to dispel issues then let one
of their planned early adopters take one for a spin.

------
tomdell
That GM entered into a highly valuable partnership with this transparently
fraudulent company doesn’t inspire confidence about their future.

Milton’s last company was accused of not delivering on deal terms, and it
seems as though that company BSed their way to an acquisition. Before that, he
was involved in random low-tech businesses - at least one of which he
seemingly lied to a partner about his profit off of.

The company’s name is so unoriginal that I wonder how anyone can take them
seriously. It’s like an off-brand Tesla - just riding the association to trick
people into parting with their money?

~~~
Qub3d
I suspect, as does Hindenburg research, that GM saw the Nikola partnership as
more of a PR spend than a partnership. Its about the optics.

------
raiyu
Does anyone have issue with the name of company besides me?

I mean the largest EV manufacturer is Tesla and they name their company
Nikola?

It’s like years ago when public companies would rebrand as blockchain
companies and see their stock soar.

~~~
liability
I think this was one of the first red flags. It reminds me of ripoff movies
that have names similar to popular movies to sleaze some of that popularity
for themselves. Like Transformers / Transmorphers.

------
nkurz
Nikola's refutation says that "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."

It seems clear that they are right that the report is driven by "greed" and
"short sale profit", and that the goal is drive down their stock price. The
more important question, though, would seem to be whether the accusations are
true. Are there any Nikola supporters here who can debunk any of the bullet
points at the top of the Hindenburg report:
[https://hindenburgresearch.com/nikola/](https://hindenburgresearch.com/nikola/).

Conclusively refuting any of them would be useful, but the most important ones
to me are the ones involving their demos. Did they lie to the public about the
functionality of their vehicles at the time? Or did they merely mislead the
public with language like "in motion" and "cruising" to describe a truck
rolling down a natural incline? Does that distinction matter to you, or only
as relates to potential SEC action?

(I'm currently holding some puts that I bought---slightly too late to be
profitable yet---as a result of Hindenburg's report, making me effectively
short NKLA)

------
darksaints
Its unfortunate that their failures are going to prevent VC investment in fuel
cell tech for the next couple of decades.

Some suggestions, not that they're listening:

1) deliver one thing before promising the next

2) Use SOFCs, not PEMFCs. They're more stable, more efficient, longer lasting,
higher power density, can use hydrocarbon fuels if necessary, produce heat at
useful temperatures, and they're way cheaper. Their only disadvantage is their
startup times, which _is not a problem, and never has been, for long haul
trucking_.

3) Choose your competitors better. You have zero expertise in building trucks,
but you have amassed expertise in building fuel cell power plants. Lucky you:
trucking is nothing like cars...alternative powerplant manufacturers are
extremely common upgrades when buying a truck. Instead of competing with
Peterbilt, you should be competing with Cummins as a supplier for Peterbilt.
And when you've pierced that market, you start going after Mitsubishi,
Wartsila, Hyundai, Rolls Royce, and MAN.

------
samizdis
Reasonably measured take on the story from the FT:

[https://www.ft.com/content/8a8a2396-6e97-4cfd-9f80-c5aaa2de3...](https://www.ft.com/content/8a8a2396-6e97-4cfd-9f80-c5aaa2de304f)

Sadly, I've not been able to find a non-paywalled version syndicated anywhere
else. (Although it can be retrieved at archive.is)

Some interesting quotes from the article:

 _In this relentless barrage of hype, delivered in a disarmingly low-key
manner, it is easy to forget the reality. Nikola has yet to put any vehicles
into production. And, as its regulatory filings make clear, it has no orders
at all for its fuel cell trucks, only non-binding reservations.

As for all the technological brilliance ... there is precious little to be
seen. Nikola boasts a grand total of only 11 patents in the US, with another
55 applications pending._

And later:

 _Nikola faked a video of one of its trucks by making it look like the vehicle
was driving under its own power when it was really only rolling downhill,
according to Hindenburg’s report — a claim backed up by FT reporting this
week.

“It was built to be a working prototype,” Mr Russell insists of the truck.

But did it actually work? His answer, after a long pause: “I wouldn’t comment
on that.”_

In its pay-off, the FT draws pointed comparisons with Theranos.

A good read, wherever the truth lies.

~~~
imglorp
I'm a little curious about the (allegedly?) rigged demos.

There's dozens of youtube garage tinkers who could slam some off the shelf
parts into a random salvage chassis in under a week. Maybe they won't meet
many performance targets but they'll at least be able to show something moving
under its own power. The point is, making _one_ electric or H2 vehicle is a
very low bar now. Making one manufacturable, and a production line to do it,
is the hard problem.

So why show a nonworking sham?

~~~
jboog
Yeah you're right, it's all so bizarre.

This dude IPOd a unicorn startup and is (for now) a billionaire by selling a
vision of a manufacturing company with a non-working prototype that literally
almost anyone with modest engineering skills could pull off.

The Founder has no engineering background (in fact no college degree), no
experience in the vehicle industry, no brilliant engineers or killer patent on
technology.

It smelled super fishy when they first IPO'd but I figured since all these VCs
and vehicle manufacturers were partnering with them there must be something
under the hood.

Now it seems like such a transparent fraud. How did so many people that should
have known better get conned into this?

------
jariel
$30 Billion valuation with no product, no customers.

Insiders taking millions out of the company.

Lied about major IP developments and ownership (Hydrogen, Fuel Cells, parts)

This is insane, and I can't believe that GM would go near this toxic pile of
garbage, it's utterly shameful and makes GM execs look completely stupid and
incompetent.

GM is getting an 'inspired truck idea' \- how hard would it be to create a
little independant division and hire some freaking designers and inspire
people a little bit? Which would be good for their whole company?

Nikola looks like fraud, but they're just a scammers, in a way it makes GM
look worse.

------
akrymski
I don't think the comparison to Theranos is accurate. Nikola may be
overvalued, but they do have (billions?) loads of pre-orders for hydrogen
trucks. Manufacturing the vehicles isn't rocket science - lots of companies
are manufacturing hydrogen buses that are in use in EU for example. The tech
definitely exists, the same way battery tech existed before Tesla. Hydrogen
makes more sense for trucks as it's lighter, and by outsourcing manufacturing
most of the risk is removed.

PS Email me if you are interested in building a hydrogen powered flying
vehicle.

~~~
bfieidhbrjr
The preorders mainly come from a company with tiny assets, I think sub $100m.
It's hot air.

~~~
pepy
"U.S. Xpress had only $1.3 million in cash on hand last quarter."

------
ericb
I have mixed feelings on this. Nikola has a Theranos vibe to it. On the other
hand, "Citron Research" has created stock crashes on shaky ground in both
Shopify and Tesla using hit pieces with claims that didn't pan out. I'm not
sure if it is a stopped-clock is right twice a day thing, or if this is a
poker strategy adding to EV by mixing in bluffs with solid poker hands.

------
nimish
Companies that spend time agitating about short sellers have a straightforward
way of shutting them down: proving they are a legit, going concern and
bankrupting shorts.

That's the nature of the game when you're trying to sell shares. It's on you
to prove you are a real company. The SEC requirements are because prior to
them companies lied all the damn time and got away with it

------
bitxbit
Nikola isn’t really an innovator in my view. They take what’s out in the
market and assemble them which is not really that practical when it comes to
manufacturing vehicles. This is like me saying I have an automobile company
for nuclear powered trucks. And they should be valued as such.

There are a lot of electric car manufacturers putting in real work such as
Bollinger Motors.

------
brianwawok
Let's pretend everything is true as presented. Maybe a little marketing
exaggeration, but a real product is close to ready. Cool.

Looking at various sources such as

[https://www.greencarreports.com/news/1127660_battery-
electri...](https://www.greencarreports.com/news/1127660_battery-electric-or-
hydrogen-fuel-cell-vw-lays-out-why-one-is-the-winner)

I just don't see the case for hydrogen over battery? It surely can cost less,
but I see battery pricing dropping every year. In the 20 year timeframe, is
hydrogen still a big win over batteries? Is there something fundamental about
the technology that makes storing hydrogen better than batteries?

~~~
Hypx
I see batteries not getting much cheaper at all, and likely hitting some
plateau in cost reductions. It wouldn't surprise me if it is followed by cost
increases as demands for sustainable production and recyclability increase.

Hydrogen is not just cheaper than batteries, but fundamentally cheaper in a
way that batteries can never match. For instance, underground storage is at
the cents per kWh of storage. So batteries can never get there. In 20 years, I
suspect FCEVs will have taken over, with BEVs mostly abandoned as being too
expensive to justify their existence in most circumstances.

~~~
brianwawok
Fundamentally I agree that FC storage can be very cheap. Just a metal tank
with some valves or whatever, right?

a) What stops the fundamentals of batteries from also continuing to get
cheaper? Current batteries are using less of some expensive metals, is there
some kind of law that is going to make us hit a wall at current battery
pricing? I don't see this yet, nor have I seen research papers, but I may have
just missed them?

b) The way I understand it, is the cost of creating the Hydrogen is the
expensive part now. Is there proof that it will be cheaper with time, and that
the end state of producing hydrogen is cheaper than the end state of producing
batteries?

~~~
Hypx
You need a lot of metal, especially if you want a big battery. Realistically
we're not going to see batteries much cheaper than what we have now.

Hydrogen is likely to be cost of green energy plus some additional cost
factor. So if solar is $0.02/kWh, then hydrogen will be maybe 2x that in the
very long run. Everything points to hydrogen eventually getting to around
$1/kg, or cheaper than just about any other kind of fuel.

~~~
brianwawok
This graph is showing a fall by about another half by 2030 for Lithium Ion

[https://about.bnef.com/blog/behind-scenes-take-lithium-
ion-b...](https://about.bnef.com/blog/behind-scenes-take-lithium-ion-battery-
prices/)

What if there is a different battery technology (not Hydrogen) that allows
another half or more fall? Could still be a long ways to go..

~~~
Hypx
At some point you just accept that hydrogen is a battery technology with the
highest possible energy density and give up on silly in-between ideas.

------
mschuster91
Lawsuits against shortsellers? Where did we have that just recently? Oh yeah,
Wirecard - or as we call it in Germany "Auweiacard"...

------
exabrial
How much is their CEO getting paid vs what have they delivered? There are
_definitely_ _a_ _lot_ _of_ red flags.

------
projektfu
Legal action? Did they lie (libel)? Did they fail to disclose their position?

------
diogenescynic
Threatening to sue short sellers always seems desperate.

------
new_realist
It's amusing to see Tesla stans hate on Nikola, when the two companies'
characteristics and tactics are almost identical. Any criticism that applies
to Nikola applies to Tesla, and vice versa. If anything, Nikola is moving more
quickly than Tesla did early in its 17 year history.

------
saberdancer
I really dislike the name of the company. Screams copycat and scam.

------
m3kw9
Smearing his current company based on his past makes the short case less trust
worthy

~~~
ogre_codes
> Smearing his current company based on his past makes the short case less
> trust worthy

So you'd invest in Elizabeth Holme's next bio-tech startup?

~~~
m3kw9
Less likely but would need to closely scrutinize it more than before. I
believe in 2nd chances.

~~~
ogre_codes
Fool me once, shame on you. Fool me twice, shame on me.

Second chances are for people who make mistakes, not for people who engage in
fraud and deception. If you give me the shaft consciously and knowingly, it's
a long road to get my trust back.

------
bryanlarsen
Interesting to compare against Lucid Motors. Founded thirteen years ago and
still not shipping, dismissed as vaporware for so long, yet are now surprising
people by getting production versions of their car to early reviewers.

[https://m.youtube.com/watch?v=7ZkuJY1GWtE](https://m.youtube.com/watch?v=7ZkuJY1GWtE)

------
switch11
This is interesting to me

I watched some videos of Trevor Milton. He has ZERO signs he is faking

HOWEVER

A) Just because someone's body language and presentation is PERFECT doesn't
mean they are telling the truth. They might have convinced themselves of the
lie

B) The Truck Video is SUPER DODGY. It's shot from an angle that makes it
impossible to tell what the incline angle is. It could VERY easily be just a
truck with no engine rolling down a slight incline

C) The walkthroughs etc. Trevor Milton does are SUPER DODGY.

Elon Musk with Tesla talks about crazy things that might never happen (Full
Auto Pilot Level 5 Driving) but half of the crazy stuff he DELIVERS

Trevor Milton seems to be just as good as Musk at promising things, but so far
has not delivered anything

 __ __ __ __ __ __ __*

On the one hand, it would be great if Nikola delivers a great truck

Competition for Tesla

Death to these parasitic short sellers

ON THE OTHER HAND

Don't see what exactly is the VALUE Nikola is providing. GM is building
everything. So is Nikola's contribution selling a great story ???

It's like Musk's ability to sell stories, but lacking Musk's abilities to

A) get subsidies from the government B) actually deliver products

Trevor Milton and Nikola are getting money from the stock market. That comes
with a lot of dangers which government contracts and subsidies do not

~~~
liability
Did you believe short sellers are "parasites" before Elon Musk started ranting
about them, or did you get this idea from him?

