SEC probing Nikola, shares fall again

Phoenix-based Nikola Corp. is the latest company to be in the SEC’s hot seat after short-seller Hindenburg Research accused it of being engaged in “intricate fraud” by over-exaggerating the capabilities of the electric trucks the company is building. The DOJ has also joined in on the probe, with federal prosecutors looking into claims that Nikola “misrepresented progress it made in developing key technology core to releasing new models.” Accusations in Hindenburg’s report include that Nikola misled investors and violated securities laws.

Neither the SEC or DOJ have announced any formal investigation into the matter nor have they confirmed any wrongdoing, but instead are examining records and doing preliminary research to see if Hindenburg’s claims have truth to them. The SEC declined to comment on the matter Tuesday.

Shares of Nikola have tanked even more since the saga began last week, with stock down 8.3% on Tuesday. This was yet another blow to investors, seeing as Nikola shares had already dropped almost 25% last week when the Hindenburg report was released. Michael Wayland of CNBC reported that Nikola quickly responded and denied the claims, saying there were “dozens of inaccurate allegations” in Hindenburg’s report, which was titled “Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America.”

Related: Nikola partners with GM to produce electric pickup

After Hindenburg’s report was released last week, Nikola stated that its legal counsel had “proactively contacted and briefed” the SEC and added that “Nikola welcomes the SEC’s involvement in this matter.” The company has vehemently denied over-exaggerating its ability to manufacture its fuel-cell powered trucks and produce hydrogen for them, bluntly stating, “These 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.”

The statement also claimed that the explosive report was tweaked to “financially benefit short sellers, including Hindenburg itself.”

The Hindenburg report surmised that Nikola as a whole is “intricate fraud built on dozens of lies” and that Nikola’s founder and chairman, Trevor Milton, has been spreading lies and inflating the company’s technologies and abilities throughout his entire career. The report outlined how Nikola allegedly never created the hydrogen battery technology it has continuously boasted about and instead “now plans to use GM’s battery technology instead.” It also alleged that Nikola has lied to investors about the in-house creation of other “revolutionary” technologies and has instead purchased them from other manufacturers.

Hindenburg also alleged that Nikola misled investors (and consumers) in a promotional video from 2018 that “gave the impression that a prototype was capable of being driven when the truck had in fact been rolled down a hill.” Nikola responded by saying it had not claimed the truck was “driving under its own propulsion” despite numerous social media posts that had reportedly implied it was. Nikola has also downplayed or refuted several other claims of misrepresentation since the report was released.

Although Nikola was a relatively unknown company when it was founded in 2014, it has gained traction and has since partnered with many big names, most recently GM, to build the company’s electric pickups with the goal to compete with Tesla to become the first zero-emission trucking manufacturer. While the current SEC and DOJ probes will understandably be a concern for Nikola, if no wrongdoing is found, Nikola has several quite prominent corporations that may just have the business expertise, tools and resources to help it stay in the competition.

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