Nikola Corp. the hydrogen and electric truck startup that recently announced a $2 billion stock deal with General Motors, saw its stock price plunge for the second day in a row following a report by a short seller that alleged the company is an “intricate fraud.” The company has since disputed the report and threatened to take legal action.
Hindenburg Research, which makes money by betting against companies, published a report alleging a range of misdeeds, including that Nikola (NKLA) and its founder and executive chairman Trevor Milton presented a product as being closer to market than it actually was.
Hindenburg Research specifically noted that it had corroborated a Bloomberg report from June, which claimed that Milton ”exaggerated” the capabilities of the company’s initial debut of the Nikola One, a hydrogen fuel cell electric semi-truck. Milton had said the Nikola One “fully functions” at its launch event in 2016. The Bloomberg report, however, said it was not actually drivable as originally presented. In an interview with Bloomberg, Milton said he “never deceived anyone.”
CNN was unable to authenticate the claims made in Hindenburg’s report.
The company’s stock closed down 14.5% Friday, following an 11% plunge Thursday.
Nikola is disputing the report. “Nikola has been vetted by some of the world’s most credible companies and investors,” Nikola said in a statement Thursday. “We are on a path to success and will not waver based on a report filled with misleading information attempting to manipulate our stock.”
Milton tweeted that the report was a “hit job by hindenburg” and an attempt at stock manipulation and promised a detailed rebuttal.
On Friday, the company announced it had hired a law firm to explore legal action against Hindenburg and said it plans to bring the matter before the Securities and Exchange Commission, but it did not provide any further details. Nikola said it would offer a more detailed rebuttal to the allegations at a later date.
“We stand by our research 100%,” Hindenburg said in an email to CNN. “The company answered none of the 53 questions we raised in our report after promising a full rebuttal.”
Nikola Motors, a subsidiary of Nikola Corp., has said it is developing hydrogen fuel cell- and electric battery-driven semi-trucks, off-road vehicles and pickups. The company went public earlier this year and, in the immediate aftermath, its shares shot up by more than 100%.
Hindenburg touts itself as a “forensic financial research” firm that, according to its website, has made serious allegations against a number of companies, most of which appear to be smaller firms. It says some of those firms or their executives have subsequently been charged with fraud by the Securities and Exchange Commission. CNN has not verified these claims.
In the introduction to Thursday’s report on Nikola, Hindenburg states that it has taken short positions on the company’s stock. Short positions allow investors to profit when a stock’s price goes down. Critics of short sellers, such as Tesla CEO Elon Musk, have alleged that short positions incentivize market manipulation.
Hindenburg’s report came two days after Nikola announced it had inked a deal with GM (GM) to build Nikola’s Badger electric pickup. None of the allegations in Hindenburg’s report pertain to the GM (GM) deal, however.
Under the terms of the deal, GM announced it was taking an 11% equity stake in Nikola and, in return, would build electric and hydrogen-powered versions of the Badger using GM’s own engineering.