Why Nikola Was Never Actually A Tesla Challenger
When Nikola was listed in June, it took the electric vehicle markets by storm, and its shares rose more than 100 percent in three trading days. Now, just four months later, the company faces an investigation by the Securities and Exchange Commission, its founder has resigned from his position as chairman, and GM is renegotiating a deal that is as good as sealed for the newcomer in the US government Car manufacturing was extremely optimistic.
Nikola has been hailed by the media as a challenger to Tesla, perhaps because of his name. The startup, which focuses on both battery-electric and hydrogen vehicles with a focus on the tractor-trailer and truck markets, presented a prototype of its Badger model for the first time in 2016. At the time it went more or less unnoticed, but performed after Nikola it became a focus of attention. Not all of this attention has been positive.
Things started to relax last month after short-selling firm Hindenburg Research released a scathing report calling Nikola "an intricate scam based on dozens of lies over the course of its founder and CEO Trevor Milton's career." The company said: "We have gathered extensive evidence - including recorded phone calls, text messages, personal emails, and behind-the-scenes photos - detailing dozens of false statements made by Nikola founder Trevor Milton. We have never seen so much deception in a public company, especially at this size. "
The report was released shortly after Nikola hit the deal that could secure its future: GM agreed to invest $ 2 billion in the company to get a minority stake and start manufacturing the battery-electric roof. It would also give Nikola access to GM's electric vehicle technology and fuel cells for its hydrogen tractor units. It was the kind of business that could serve as a shortcut between an unknown startup and a recognized automaker. But the future of this deal is also uncertain due to the Hindenburg report.
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Nikola tried to fight allegations that his business was based on fraudulent statements. The short-selling company acted in its own best interests with the report, attempting "to mislead investors and manipulate the market negatively in order to financially help short sellers, including Hindenburg himself."
The Justice Department meanwhile opened an investigation into Hindenburg Research's allegations, according to unnamed sources speaking to the Wall Street Journal a week after the Hindenburg report was published. Working with the SEC, according to the sources, the DoJ mainly focused on allegations that Nikola had overstated his advances in developing technologies that are essential for his vehicles.
A few days later, the automaker issued another statement saying that founder Trevor Milton had voluntarily decided to step down as chairman and board member. He has been replaced by Steven Girsky, a former GM vice chairman and a member of the Nikola board of directors. Girsky was also the CEO of specialty vehicle maker VectoIQ, which teamed up with Nikola to bring the automaker public. To add insult to injury, Milton's sexual harassment allegations followed.
GM also responded to the report. Bloomberg reported last week that it had started renegotiating his contract with Nikola and allegedly asked for a larger stake in the company. The news agency quoted experts as saying that the renegotiation and the higher stake make sense because Nikola’s shares have fallen by almost 50 percent after the Hindenburg report and the news that followed. The company regained some of the lost ground after reassuring investors that it was on track to meet its manufacturing goals, and some forecasters even see upside potential of up to 70 percent.
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The Hindenburg Report, however, was not the first shadow fall over Nikola's claims and goals. In June of that year, Bloomberg's Edward Ludlow reported that Milton had grossly exaggerated the Badger's capabilities, quoting people familiar with the truck saying the vehicle was inoperative and parts were missing. Milton said so too, claiming that some vital parts were taken out during the showcase for safety reasons and that the lack of a fuel battery in the hydrogen-powered truck did not contradict what he said when the prototype was launched.
However, the article referred to earlier statements by Milton in which he claimed the badger could drive on its own, which later actually turned out to be a false statement. And there are other problems, the Wall Street Journal noted in a recent article. Even if everything Milton has said about the Nikola trucks is true, according to WSJ's Katherine Blunt and Charley Grant, the company may rely too heavily on cost reductions and technological advances, which may or may not occur, to make its trucks successful .
These are not easy times for the new kid on the EV and Hydrogen Block. Perhaps the hype surrounding the Badger and Nikola semis was a bit exaggerated and premature, but it underscores the changing interests of investors who are excited about the next Tesla. Nikola won't be the next Tesla, however. Whatever Tesla plans for trucks, it is now king of the passenger electric vehicles. Nikola has never made a claim in this segment. And it has yet to be proven that it could be a competitor to Tesla in trucks too. There is currently no competition.
By Irina Slav for Oil Genealogie
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