On Sept. 10, Hindenburg Research, which has a self-proclaimed mission to prevent investors from sinking money into “totally man-made, totally avoidable disaster[s]” in the financial market, launched its biggest exposé yet, putting Nikola Corp. in its crosshairs.
Titled “Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America,” the scathing report accuses the publicly traded Nikola of fraud on several occasions, honing in on founder and executive chairman Trevor Milton for various offenses such as duping investors with misleading truck demos, getting duped by battery “vaporware,” inflating the amount of true truck pre-orders, and nepotism, among a litany of other offenses.
Previously, Bloomberg accused Milton of passing off a pusher, or inoperable prototype, of the Nikola One, as the real thing at a 2016 event. Milton refuted these accusations, which seemed dead and buried until Hindenburg exhumed them in the report.
Hindenburg Research, founded by Nate Anderson, acknowledged it is a short seller of Nikola stocks. On Sept. 14, Nikola refuted several but not all of the claims in a rebuttal posted to the company website.
Chief among these was the timing of the report, which was two days after Nikola and General Motors (GM) announced a strategic partnership for GM to manufacture the zero-emission Badger pickup truck using GM powertrain technology, as well as providing the hydrogen fuel cells for Nikola’s Class 7-8 trucks. Nikola’s stock, NKLA, went from $53.98 per share on the Nasdaq on Sept. 8 to $32.13 at the market close on Sept. 11.
Nikola said the “opportunistic timing” following the GM deal “was designed to provide a false impression to investors and to negatively manipulate the market in order to financially benefit short sellers, including Hindenburg itself.”
The allegations and responses
This is an ongoing “he said/he said” story and it deserves far more scrutiny and investigation than the deadline for this particular piece allows. One major point of contention Hindenburg had with Nikola is a 2018 video in which a Nikola One, hauling a U.S. Xpress trailer, sped down a desert highway. The production was used for a Phillips commercial and later to tout the “Nikola One in motion.”
Hindenberg attributed much of the buzz for the company and subsequent pre-orders to the video, which according to former Nikola chief engineer Kevin Lynk was more of a mirage than proof of concept. He alleged that the truck was towed to the top of a 3% low grade hill in Utah and rolled to an impressive-looking speed. The camera was allegedly positioned to indicate a flat stretch of road. Hindenberg said their investigators tried the same trick with an SUV and reached a speed of 56 mph for 2.1 miles.
Nikola said the company “never stated its truck was driving under its own propulsion in the video, although the truck was designed to do just that. The truck was showcased and filmed by a third party for a commercial. Nikola described this third-party video on the company’s social media as “In Motion.” It was never described as ‘under its own propulsion’ or ‘powertrain driven.’ Nikola investors who invested during this period, in which the company was privately held, knew the technical capability of the Nikola One at the time of their investment.”
Nikola’s ability to make its own inverters was also questioned, as a piece of equipment in a behind-the-scenes video Milton put out appeared to use off-the-shelf components from Cascadia Motion, with the face plate covered by tape.
Nikola responded: “At no time did Nikola state that the inverter on the prototype truck shown in the video was the company’s or would be used in production. Nikola has been designing, engineering and working on its own inverters for quite some time. The company does use third-party parts in prototype vehicles, some of which may be subsequently swapped out for its own parts in production. This is common practice among vehicle manufacturers and Nikola often blocks supplier names from the view of media and competitors. Every program is different as they require different specifications and validation.”
Along with painting Nikola as a con job, Hindenburg accused Nikola of being the mark on at least one occasion. They claimed battery technology Nikola was set to acquire from ZapGo Ltd. turned out to be “vaporware” and that Nikola sued the company in March 2020.
For context, last November, Nikola announced a high-density battery prototype that represented “the single most important advancement in electric vehicle history.” It would boast “a record energy density of 1,100 watt-hours per kg on the material level and 500 watt-hours per kg on the production cell level.”
Milton also said, “We've cycled over 2,000 times on each cell. And by doing that, now we have enough confidence.”
That battery concept may still have some life, Milton hinted during a recent press call, despite Nikola using GM’s Ultium battery technology for the near-term.
Of the Hindeburg allegation, Nikola said “the potential battery technology advancements are related to an ongoing confidential R&D partnership with a leading academic institution, not ZapGo. The company is excited about potential breakthroughs related to its next generation battery technology.”
Unresolved questions
Hindenburg’s detailed report asked 53 specific questions of Nikola and Milton, and all could not be addressed over a single weekend.
A few that were not addressed, and do pose serious credibility questions, include Nikola hiring Travis Milton, brother to Trevor, as Director of Hydrogen Production/Infrastructure, a title he apparently has held since 2015. As hydrogen production is so crucial to the success of the company, it is curious that Nikola would put Milton’s family member, whose credentials don’t seem to indicate he as the experience and connections to be most effective, in the position. FleetOwner directly asked Nikola about the hiring, and received this response: "The supporting evidence and documentation regarding the false allegations have been brought to the attention of the U.S. Securities and Exchange Commission."
Another question that would seem to challenge Nikola’s overall credibility is the existence of its solar panel roof at the company headquarters.
In 2019, Milton said: “We have the only off-grid headquarters that we know of, completely off of hydrogen, battery, and solar. We have 3.5 megawatts of solar up on the roof producing about 18 megawatts of energy a day in our headquarters, and we’re storing 10,000 kilograms of hydrogen and using fuel cells as energy backup and batteries as energy sources as well. Our company is truly one of the most innovative companies in the world!”
As of a January 2020 Google Earth Pro image obtained by Hindenburg, the headquarters did not appear to have any such photovoltaic infrastructure.
What to believe?
For many in the trucking industry, Nikola and its lofty claims about revolutionizing transportation of freight through hydrogen-powered fuel cell electric trucks (FCETs) always seemed too good to be true.
These Class 8 semis were planned to go 800 miles per fueling, from one of Nikola’s own hydrogen stations. Nikola would also lease its trucks for about $1 per mile. “That means the truck, the service, the warranty, the maintenance, all of it,” explained Milton in June, as the startup was on the verge of going public by merging with VectoIQ, run by former General Motors Vice Chair Steve Girsky.
Milton, who in interviews comes across as an earnest idealist and on Twitter as a scrapper with an affinity for hyperbole, launching wild haymakers such “diesel is dead,” has portrayed himself as someone to root for.
He’s also portrayed himself and Nikola as totally transparent. Earlier this year, Milton told FleetOwner: “We don’t really mind when people criticize us or wonder if it’s fake or how legitimate we are. That’s a good question to have.”
And those words were backed by the credibility of Nikola partners and customers, which include Anheuser-Busch, Bosch, CNH Industrial and GM.
After the report, GM stated: “We are fully confident in the value we will create by working together. We stand by the statements we made in announcing the relationship.”
Comments from Bosch also favor Nikola: “Bosch has been a supplier to Nikola for several years and invested in early funding rounds of the company. Specific instances in the report quoting a Bosch employee were taken out of context. He spoke only about Bosch’s own plans for the IAA industry show and H2Haul project for the European Union.”
Despite how much of the Hindenburg report overall is true, exaggerated or fabricated, more analysis is needed to come to any concrete conclusions.
