The Nikola One show truck at the company’s December 2016 unveiling was also non-functional. But the company claims that it’s all a semantic debate because Nikola One powertrain components had been bench tested before the decision was made to redirect resources away from making it move under its own power, so the prototype was “designed to work,” which is not the same thing as actually working.
Hindenburg also claims dummy animations were loaded onto the screen, and hydrogen decals were applied to the truck despite it being designed to run on natural gas. So not only was the vehicle mechanically non-functional, much of the technology inside was not complete either. But speaking of hydrogen…
CEO Trevor Milton Hired His Brother to Build Nikola’s Ambitious Hydrogen Network
The Hindenburg report also accused the company of nepotism, saying that executive Trevor Milton hired his brother, Travis Milton, to be in charge of building out the company’s hydrogen infrastructure. It claims the latter Milton is unqualified for this, saying he has little relevant experience having only worked as a self-employed building contractor in Hawaii prior to joining Nikola as its Director of Hydrogen Production/Infrastructure.
In response, Nikola says “Travis Milton previously owned and operated his own construction company preparing him for hydrogen station infrastructure and buildouts.” Not much of a rebuttal there considering the complicated logistics involved with the safe dispensation of hydrogen gas.
And as far as claims that the company isn’t producing any hydrogen right now, they seem to be true with caveats. Nikola has a deal with Nel ASA—a well-known manufacturer of hydrogen-producing equipment—to build a facility at its headquarters capable of producing 40,000 kilograms of hydrogen per day. As of now, however, the company only has storage for hydrogen (and just 1,000 kg of capacity.)
Advanced Battery Claims
Prior to the GM deal, which will see Nikola’s trucks use the General’s new Ultium battery packs, Nikola had been teasing breakthrough battery tech to deliver on its impressive-sounding range and power promises. This technology, which didn’t exist yet in the marketplace, would come from a U.K. supplier called ZapGo. Nikola paid ZapGo $2 million before it was revealed that ZapGo’s products were vaporware and the British company was in hot water over apparent tax fraud. According to court docs obtained by Hindenburg, Nikola found out about ZapGo’s deceit as early as December 2019, though Milton continued to talk about the promised magic battery for several more months.
Nikola’s side of the story is that Milton’s public statements regarding its battery tech in the first months of 2020 weren’t related to ZapGo. Instead, Nikola says Milton was referring to the upcoming fruits of a partnership with a “leading academic institution.” It did not offer a name of said institution.
Hindenburg’s September 15 Response to Nikola’s Refutation
It would be fair to suspect that as soon as Nikola posted this rebuttal on Monday—and Hindenburg Research finished reading it—it began to write up a refutation for Nikola’s response. At 5,300 words, it has certainly been busy since Nikola made its comments.
Titled “We View Nikola’s Response As a Tacit Admission of Securities Fraud,” it refutes many of the points that Nikola makes in its rebuttal, claiming that the language was sculpted carefully by lawyers, and that—just as we have said—many of the points Nikola makes are more or less admissions or non-answers. It also lists every point that Nikola chose not to respond to. In total, Hindenburg says 43 out of its 53 points were unaddressed.
“Despite claiming to have found ‘dozens’ of inaccuracies with our report, Nikola’s response essentially validated all of the issues we raised,” the latest Hindenburg reply said. The rest of it goes like this:
In other words, if Nikola thought its latest statements would settle this debate for good, it was quite mistaken.
The Bottom Line
As ever, it’s worth noting these allegations were made by an entity with a vested interest in Nikola’s stock price going down. But if Nikola thought its latest statements would iron everything out, it was wrong.
GM’s CEO Mary Barra says that their deal was done with just as much scrutiny as any other agreement at this level. And she defended the deal as helping GM achieve scale with EV production.
“We will still compete fiercely as it relates to go-to-market with our strong brands like we do today,” Barra told CNBC. “This is just a more efficient way to do it. It gets us scale faster, so it’s good for the customer but also is good for the General Motors shareholder cause our technology is being used more broadly.”
However, GM’s stock price, and that of Nikola, took a hit since these allegations were made. I would certainly like to hear more details from a source other than a short-seller who would seek to gain from Nikola’s failure, or Nikola itself, to say the least.