Nikola Corp. Tries to Truck the Short Haul

Thom Weidlich 09.24.20


The resignation this week of Nikola Corp. founder Trevor Milton as chairman raises the stakes in the company’s battle with Hindenburg Research and also raises, more generally, the whole headache of dealing with short sellers. Nikola, which aspires to make battery- and hydrogen-run trucks, has certainly hit a bump in the road.

On Sept. 10, short seller Hindenburg published a report arguing that Nikola is, well, a fraud. The question for Nikola: How to respond? Many people view short sellers — which seek to make money by betting a stock price will plummet — as a cancer on the market. Others see them as a safeguard against corporate corruption.

There are some standard responses to such an attack. The first is to argue the naysayer is simply trying to drive down the share price. Eventually, though, one must confront the accusations. This is best done by arguing the facts.

In Phoenix-based Nikola’s case, the situation is particularly sensitive because it had just announced Sept. 8 that it would enter into a partnership with General Motors in which GM would receive an 11 percent ownership stake in return for certain in-kind contributions. That deal boosted investors’ confidence in the startup. Hindenburg, whose report heavily targets Milton and his alleged “dozens of outright lies,” was bursting Nikola’s balloon. The company’s shares, which rose with the GM fanfare, crashed with the Hindenburg nightmare. U.S. regulators and prosecutors are reportedly investigating the accusations.


We have nothing to hide and we will refute these allegations.

— Nikola Corp.

Nikola, which has yet to release a product, did release a short-ish statement Friday, Sept. 11 — the day after the short-seller’s salvo — disputing the claims. “We have nothing to hide and we will refute these allegations,” it wrote.

On Monday, Sept. 14, it issued a lengthy (2,200-word) press release. The statement starts off enumerating the projects it has in the pipeline, a not-misguided attempt to show that it’s a real company. Then, decrying that the Hindenburg report “contains a number of false and misleading statements” (pretty milquetoast), it addresses those.

Prototype Truck

For example, it said the short seller mischaracterized a quote from an employee at a technology partner. It admitted it used another company’s technology, rather than its own, on a prototype truck, but said it never denied that. And it rebuffed a charge about the firing of a CFO.

The accusation that drove most media coverage was Hindenburg’s contention that a promotional video shows a Nikola truck rolling down a hill rather than moving on its own. Nikola admitted this, but said the video never labeled the truck as being “under its own propulsion.” For the press, this was an admission to grab onto. “Nikola Admits Rolling Truck Down Hill as It Counters ‘Fraud’ Claims,” the Financial Times announced.

In an interesting approach, the company followed each of its 11 bulleted points responding to Hindenburg’s charges with the same italicized statement, which invokes the toying-with-the-market message and reads like near legal boilerplate: “These allegations by the short seller are false and misleading, and designed to manipulate the market to profit from a manufactured decline in Nikola’s stock price.”

As for Chairman Milton’s resignation, the press release on that makes no mention of Hindenburg’s report, which raises suspicions and certainly doesn’t switch off the story’s engine.

Photo Credit: Nikola

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