Nikola’s fender bender with the facts
Life comes at you faster than a hydrogen-powered electric truck rolling down a hill when you go from running a privately owned business to a public company. Just ask Trevor Milton (pictured below).
One day you’re a high-flying chief executive of an electric truck company who’s inking multibillion-dollar deals with General Motors and the next you’re having to defend allegations that your vehicles can only go downhill.
Welcome to the ups and downs (ahem) of running a publicly traded company.
Since that sleepless night back in June after Nikola agreed to go public via a reverse merger with a special purpose acquisition company, Milton has been on a wild ride.
Despite having no product to sell, Nikola’s stock price shot up to a peak of almost $80 during its first few days as a publicly traded company. At one point it reached a valuation of more than $30bn, on par with Ford. The listing made Milton a billionaire on paper.
Better yet, the Arizona-based company agreed to sell an 11 per cent stake to GM last week. Shares in Nikola jumped 50 per cent.
But just 48 hours later, short-sellers at Hindenburg Research called Nikola “an intricate fraud” in a scathing report released on Thursday. Nikola’s market capitalisation is now down to about $13bn. In response, Milton said the company “has nothing to hide”.
If you’ve got some time, the Hindenburg report is worth a full read. One particular allegation stands out — that Nikola faked a demonstration of one of its trucks in 2018 by rolling it downhill. The claim was backed up by FT reporting last week.
Then Milton himself confirmed it in a 2,700-word rebuttal to Hindenburg’s claim. “Nikola never stated its truck was driving under its own propulsion in the video,” he clarified on Monday.
Yes, Nikola described the video as “in motion” but didn’t say the truck was “under its own propulsion”. And it was a “gentle hill”. Glad we got that sorted.
The elements are all there: a founder who wants to “change the world”, a company with a large valuation but a product that doesn’t yet exist, and a “haters gonna hate” mentality at the first sign of criticism.
Milton doesn’t get any points for originality here — he did after all name his company Nikola when its biggest rival is called Tesla.
It’s important to remember that GM has not paid cash for its Nikola stake. It will instead contribute its battery and fuel cell technology to help develop Nikola’s vehicles.
If things do go wrong with the investment, it will be embarrassing but there’s likely little financial loss.
For Spacs, however, it could be a huge blow. It was just a few weeks ago that team DD asked whether blank-cheque companies could shake their bad reputation.
We’ll be talking about this very topic at the next DD forum on the Spac comeback this Thursday at 1pm New York time with DD’s James Fontanella-Khan and Ortenca Aliaj. Joining us will be Steve Girsky, a Nikola board member. Sign-up here.