Shares in Phoenix-based Nikola Corp. slid Thursday after an investment firm reported the maker of alternative-fueled trucks fraudulently claimed its vehicles could do things they can't, like drive.
Among the most flagrant allegations in the report from Hindenburg Research is that Nikola simply rolled one of its trucks down a hill to film a promotional video in an "elaborate ruse" because the vehicle was not functional.
Nikola stock was down about 11% for the day, though it's still up for the week following blockbuster news Tuesday that General Motors would spend $2 billion on an 11% stake in the company.
Hindenburg has "shorted" stock in Nikola, meaning the company intends to profit if the stock declines. That means the negative report Hindenburg issued serves its own purposes to profit if it causes investors to dump the stock.
“Nikola has been vetted by some of the world’s most credible companies and investors," Nikola said in a prepared statement in response to the report. "We are on a path to success and will not waver based on a report filled with misleading information attempting to manipulate our stock.”
Hindenburg Research, which is intentionally named after the 1937 airship disaster and specializes in takedowns of publicly traded companies, called Nikola "an intricate fraud built on dozens of lies over the course of its founder Trevor Milton’s career."
Perhaps worse, the report compared Nikola to Theranos, a notorious blood-test company that eventually agreed to a $4.65 million fraud settlement in Arizona for selling faulty tests. Founder and CEO Elizabeth Holmes paid a $500,000 penalty with the Securities and Exchange Commission and agreed not to lead a public company for a decade after the flame out.
Milton responded to the report on Twitter.
"Cowards run, leaders stay and fight for integrity," he said. "Hindenburg is only making people love us more for trying to destroy us. It will take the rest of the day to address the one-sided false claims, but I will put out a detail report to address it. In the meantime, troll on."
Nikola's fast rise under Trevor Milton
Executive chairman Milton founded Nikola in his home six years ago.
Nikola broke ground in July on a factory in Coolidge that the company says could employ 1,800 people.
Without any production or significant revenue yet, the company has become one of Arizona's most valuable companies, with a market capitalization of more than $14 billion as of Thursday.
The Coolidge factory is reported to cost $600 million. The company says it will be able to produce 35,000 vehicles annually.
Nikola has made other notable deals recently, including an order from Phoenix-based Republic Services trash-hauling for 2,500 electric truck chassis and bodies.
Hindenburg researchers don't buy any of it and suggest that GM made a significant error in partnering with Nikola, which they say was done to try to keep up with the soaring value of Tesla Motors Corp., a competitor to Nikola and traditional automakers led by CEO Elon Musk.
"The real 'value' for GM seems to be branding," Hindenburg wrote. "We believe the legacy automaker simply seeks to latch General Motors’ storied name onto Nikola’s charismatic founder and executive chairman .... But in GM’s attempt to keep up with Elon Musk, who did they just get into bed with?"
Researchers said they spoke with a former Nikola employee who told them the 2018 video of a hydrogen-electric Nikola One semitruck pulling a trailer was fabricated.
Hindenburg researchers say they sent in investigator to the highway in Utah where Nikola filmed the video and confirmed a vehicle coasting down the hill in neutral could hit a high speed on the gradual downhill slope.
The video of the truck, which still is available on Youtube, was used to announce the Arizona facility at a kickoff event in 2018, where Gov. Doug Ducey praised the company.
"This is a huge announcement," Ducey said at that event.
Nikola representatives sent a brief statement to The Arizona Republic and did not respond to direct questions regarding whether that promotional video was fabricated.
The Hindenburg report turned up other Phoenix connections, including a lawsuit filed by Phoenix-based Swift Transportation against a previous company Milton ran that was contracted to convert vehicles for the massive trucking firm.
Reach reporter Ryan Randazzo at ryan.randazzo@arizonarepublic.com or 602-444-4331. Follow him on Twitter @UtilityReporter.
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