Nikola Shares Hit As Short Seller Claims EV Maker Is An ‘Intricate Fraud’

Shares in Nikola plunged 11% on Thursday after short seller Hindenburg Research released a report claiming that the maker of hydrogen-fueled vehicles is an “intricate fraud built on dozens of lies”.

Hindenburg Research claims that it has has gathered extensive evidence – including recorded phone calls, text messages, private emails and behind-the-scenes photographs – detailing dozens of false statements by Nikola (NKLA) founder Trevor Milton.

“Trevor Milton, through dozens of outright lies, was able to form partnerships with some of the largest legacy auto companies in the world in their desperation to catch up to Tesla’s electric vehicle (EV) leadership status,” Hindenburg Research wrote in the report. “We have never seen this level of deception at a public company, especially of this size.”

Since Nikola went public on June 4 via a merger with VectoIQ, the stock has soared from below $15 to around $50 earlier this week, following the announcement that General Motors will take a 11% stake the company as part of a partnership to build electric pickup trucks. Shares in the company, which plans to manufacture hydrogen-electric trucks but has not yet produced or sold any vehicles, have plunged 38% over the past 3 months. (See NKLA stock analysis on TipRanks)

“Tens of millions of shares shorted the last day or two to slam our stock and hit job by Hindenburg,” Milton wrote in a Twitter post. “I guess everything is fair game in war, even a hit job. I know who funded it now. Give me a few hours to put together responses to their lies. This is all you got?”

The Hindenburg report also alleged that Nikola “seems to be bringing nothing to the [GM] partnership but concept designs, their brand name and up to $700 million they will be paying GM for costs related to production”, while using the automaker’s battery technology and production capabilities.

Meanwhile, some analysts have been cheering the GM-Nikola partnership. Wedbush analyst Daniel Ives called the deal a “paradigm changer” for Nikola with regard to its future EV and fuel cell ambitions.

“There have been many skeptics around Nikola and its founder Milton’s ambitions over the coming years, which now get thrown out the window with stalwart GM making a major strategic bet on Nikola for the next decade on the EV and fuel cell front,” Ives wrote in a note to investors. “For GM given its strategic goal around EV battery technology for the coming years and its massive $20 billion of investments earmarked for electric and autonomous vehicles by 2025, we view this as a smart strategic bet at the right time.”

For now NKLA has 5 analysts covering the stock, who are divided between 2 Buy ratings and 3 Hold ratings adding up to a Moderate Buy consensus. The $57.67 average price target puts the upside potential in the shares at a promising 54% over the coming year.