Fake News or Fake Truck? Hindenburg Alleges Nikola One Videos Were Faked

Nikola Motor Company (“Nikola”) is an Arizona-based startup company that designs and manufactures electric components, drivetrains and vehicles.

In June of 2020, Nikola was valued at around $12 billion and in September, announced a manufacturing partnership with General Motors (“GM”) where GM would acquire an 11% interest in Nikola. After the announcement, the company’s market cap then increased more than twofold to $30 billion subsequent to its June Nasdaq debut.

The company’s electric semi-truck, Nikola One, also made headlines in September after the forensic financial research firm, Hindenburg Research, made claims that Nikola faked many of its claims related to the Nikola One, going as far as saying that Nikola is “an intricate fraud built on dozens of lies.”  Hindenburg Research alleged that various photos and videos of the Nikola One semi-truck were falsified, stating that the semi-truck could not in fact move on its own and the videos showed it rolling down a hill. Nikola released a statement essentially admitting this, stating that the company “…ultimately decided not to invest additional resources into completing the process to make the Nikola One drive on its own propulsion.” Hindenburg Research’s website also details a history of alleged inconsistent and inaccurate statements by Nikola’s founder, Trevor Milton.

While the allegations made by Hindenburg Research are quite serious, there is an important caveat to this story. One of Hindenburg Research’s primary goals in this scenario is to profit from a decline in Nikola’s stock by shorting the stock. According to Hindenburg Research’s website, “…we use fundamental analysis to aid our investment decision-making, we believe the most impactful research results from uncovering hard-to-find information from atypical sources.” For many, this may call into question Hindenburg Research’s motives and whether or not the firm is providing a public service by alerting the public to potential investor deception.

Nikola’s shares dropped more than 30% following the release of Hindenburg Research’s report. The accusations made in Hindenburg Research’s report resulted in Milton resigning from his role as executive chairman and board member on September 20, 2020. After the news of Milton’s resignation, shares declined another 30%. Currently, Nikola is still in talks with GM, but there is a December 3, 2020 deadline to solidify a deal.

According to the Financial Times, the Department of Justice and the Securities and Exchange Commission are in the early stages of investigating the allegations against Nikola by Hindenburg Research, as well as Nikola’s claims against Hindenburg Research for market manipulation.

If you think your organization might be a victim of fraud, contact Thomas Pratt at 412.697.5615 or tpratt@sdcpa.com or Alyssa Brunatti at 412.697.5371 or abrunatti@sdcpa.com. 

This article is part of a series supporting International Fraud Awareness Week 2020, additional entries are linked below for reference:

• International Fraud Awareness Week 2020
• How Descriptive, Diagnostic, Predictive and Prescriptive Analytics Can Be Used To Stop Fraud in Its Tracks
• Employee Refund Fraud at Amazon
• Coronavirus Fraud: Unfortunately, We Told You So

Sources:

• https://nikolamotor.com/
• https://hindenburgresearch.com/nikola/
• https://www.ft.com/content/a45a6638-167b-4e27-a9fd-576e7229f959
• https://www.forbes.com/sites/advisor/2020/09/21/nikola-corp-versus-hindenburg-research/?sh=505fdfac19b8
• https://markets.businessinsider.com/news/stocks/nikola-stock-price-plan-work-without-gm-deal-falls-apart-2020-10-1029689351