Electric car companies have been some of the most anticipated businesses to emerge on the market in recent years. Despite a turbulent few years, Tesla has managed to emerge stronger than ever in 2020, in contrast to what naysayers were saying. Now one of the best-performing stocks in the market, investors were excited to give other, alternative EV makers a shot. One of those is Nikola, an electric vehicle maker that’s designing a much-anticipated semi-truck. However, the company has since gotten into hot water when a well known short-based research group launched a scathing critique. Following allegations of fraud, Nikola’s founder has officially stepped down from the company as of Monday.
Nikola founder and executive chairman Trevor Milton said he would be leaving the company in light of the accusations, arguing that his departure will help clean up the company’s reputation and distance it from these claims. Although he still intends to defend himself against these allegations, which he insists are false, major regulators are beginning to investigate the situation for themselves. For one, the Justice Department has already begun to look into this issue for themselves.
Milton first founded Nikola back in 2015. Since then, he’s received assistance from a top executive from General Motors, which has helped solidify the company’s status in the auto industry despite not having a functional product yet. Although the company did show off a prototype electric vehicle model, the report from the short-sellers in question claimed that the truck in question wasn’t finished.
Hindenburg Research, the company that produced the report against Nikola, claimed that the company staged the demonstration of its semi-truck back in 2018. Instead, they argue that the company simply showed the truck rolling on a long, gentle slope and that it wasn’t functional yet at all.
“We have gathered extensive evidence—including recorded phone calls, text messages, private emails and behind-the-scenes photographs—detailing dozens of false statements by Nikola Founder Trevor Milton. We have never seen this level of deception at a public company, especially of this size,” read the official report released earlier in September. Shares of Nikola has quickly plunged by over 33% since the report went public.
The company has vowed to press legal action against Hindenburg in retaliation for this critical report. However, short-sellers historically have managed to evade prosecution, especially since most of their claims tend to be supported by evidence. Among the top short-based research firms out there, few have had a major lawsuit stick against them.
Shares of Nikola are down just under 20% in response to the news, one of the biggest single-day declines in the company’s short history on the market. Nikola went public via an IPO just a few months ago and was met with a warm reception from investors. Since then, however, the company has struggled to regain investor confidence amidst these claims from Hindenburg Research.
Nikola Company Profile
Nikola Corp is a designer and manufacturer of battery-electric and hydrogen-electric vehicles, electric vehicle drivetrains, vehicle components, energy storage systems, and hydrogen fueling station infrastructure. – Warrior Trading News