Nikola Motor Company, a Phoenix, Arizona-based start-up focusing on the development of a fuel cell truck, has gotten into a – as it now turns out – self-inflicted shitstorm in recent days.
It all began when Hindenburg Research, a specialist in the forensic investigation of financial fraud and shortselling, published last Thursday a detailed and devastating report on possible economic fraud, deception and empty promises at Nikola Motor and CEO Trevor Milton.
Here is a summary of the allegations from the 63-page report:
- Today, we reveal why we believe Nikola is an intricate fraud built on dozens of lies over the course of its Founder and Executive Chairman Trevor Milton’s career.
- 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.
- Trevor has managed to parlay these false statements made over the course of a decade into a ~$20 billion public company. He has inked partnerships with some of the top auto companies in the world, all desperate to catch up to Tesla and to harness the EV wave.
- We examine how Nikola got its early start and show how Trevor misled partners into signing agreements by falsely claiming to have extensive proprietary technology.
- We reveal how, in the face of growing skepticism over the functionality of its truck, Nikola staged a video called “Nikola One in Motion” which showed the semi-truck cruising on a road at a high rate of speed. Our investigation of the site and text messages from a former employee reveal that the video was an elaborate ruse—Nikola had the truck towed to the top of a hill on a remote stretch of road and simply filmed it rolling down the hill.
- In October 2019, Nikola announced it would revolutionize the battery industry. This was to be done through a pending acquisition, but the deal fell through when Nikola realized (a) the technology was vaporware and (b) the President of the battery company had been indicted months earlier over allegations that he conned NASA by using his expense account to procure numerous prostitutes.
- Nikola has never walked back claims relating to its battery technology. Instead, Trevor continued to publicly hype the technology even after becoming aware of the above issues. The revolutionary battery technology never existed – now, Nikola plans to use GM’s battery technology instead.
- A spokesman for Volvo spin-off Powercell AB, a hydrogen fuel cell technology company that formerly partnered with Nikola, called Nikola’s battery and hydrogen fuel cell claims “hot air”.
- In addition to now using GM’s battery technology, Nikola seeks to use the automaker’s production and fuel cell capabilities. Nikola seems to be bringing nothing to the partnership but concept designs, their brand name and up to $700 million they will be paying GM for costs related to production.
- Inexpensive hydrogen is fundamental to the success of Nikola’s business model. Trevor has claimed in a presentation to hundreds of people and in multiple interviews to have succeeded at cutting the cost of hydrogen by ~81% compared to peers and to already be producing hydrogen. Nikola has not produced hydrogen at this price or at any price as he later admitted when pressed by media.
- Trevor has appointed his brother, Travis, as “Director of Hydrogen Production/Infrastructure” to oversee this critical part of the business. Travis’s prior experience looks to have largely consisted of pouring concrete driveways and doing subcontractor work on home renovations in Hawaii.
- Claims of owning energy producing assets is not new for Nikola. Trevor claimed that Nikola’s headquarters has 3.5 megawatts of solar panels on its roof producing energy. Aerial photos of the roof and later media reports show that the supposed panels don’t exist.
- At one point Nikola claimed to own its own natural gas wells. There is no evidence in company filings to support this. The claims were eventually quietly removed from Nikola’s website.
- Trevor claims Nikola designs all key components in house, but they appear to simply be buying or licensing them from third-parties. One example: we found that Nikola actually buys inverters from a company called Cascadia. In a video showing off its “in-house” inverters, Nikola concealed the Cascadia label with a piece of masking tape.
- In a July 2020 podcast, Trevor said of Nikola’s “Tre” truck: “We have five of them coming off the assembly line right now in Ulm Germany.” A spokesperson for Bosch, the manufacturing partner building the trucks, confirmed this month that they haven’t made any trucks yet.
- The company’s Nikola One “reveal” was a total farce. We corroborate Bloomberg’s earlier work debunking Trevor’s claims regarding its semi-truck that “this thing fully functions and works…this is a real truck” and provide new evidence.
- We present behind-the-scenes photos showing that Nikola had an electricity cable snaked up from underneath the stage into the truck in order to falsely claim the Nikola One’s electrical systems fully functioned.
- We learned through emails and interviews with former partners that Trevor had an artist stencil “H2” and “Zero Emission Hydrogen Electric” on the side of the Nikola One despite it having no hydrogen capabilities whatsoever; it was built with natural gas components.
- We also present evidence that subsequent “reveals” were fictitious. In 2019, Nikola revealed a “next generation” version of its off-road vehicle. We learned that it was scrapped within weeks of the unveiling due to manufacturing challenges. The redesign work was then quietly outsourced.
- Nikola’s much-touted multi-billion dollar order book is filled with fluff. U.S. Xpress reportedly accounts for a third of its reservations, representing ~$3.5 billion in orders. U.S. Xpress had only $1.3 million in cash on hand last quarter.
- Nikola’s key partners and backers have been cashing out aggressively. Worthington, Bosch and ValueAct have all sold shares. Worthington sold $237 million shares over a 2-day span in July and another $250 million in August. We think they know exactly what type of company Nikola is, and we expect that as Nikola’s GM “partnership” boosts the stock price, key holders will continue to exit.
- We think 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 EV leadership status.
- Trevor has ensured he is not going down with the ship. He cashed out $70 million around the IPO and amended his share lock-up from 1-year to 180 days. If he is fired, his equity awards immediately vest and he is entitled to collect $20 million over two years. Milton has laid the groundwork to extract hundreds of millions from Nikola years before ever delivering on his promises.
- Every now and then a story comes around that exposes how little the “experts” really know. Theranos inked partnerships with Walgreens, Safeway, and Cleveland Clinic and staffed its board with luminaries. We think Nikola’s partners did not do their homework.
The most important accusations include the unroadworthy truck in the video, which makes it appear as if it is driving itself. The other one is that allegedly technology developed by Nikola does not originate from Nikola. All these actions to win established partners from the automotive industry. And that Trevor Milton has already profited the most from these deceptions, by committing sums of almost 200 million dollars.
These accusations hit like a bomb. Two of the partners, Bosch and Nel Hydrogen, denied these accusations to the German business magazine Wirtschaftswoche, and that they intend to continue developing the fuel cell truck with Nikola.
Nikola himself tried to limit the damage and published a counterstatement on Monday. With limited success. Some of the most important accusations of Hindenburg Research were confirmed in the report, so that in the video a prototype, which is not able to drive, rolls down the road, but there is no mention of it, and that the shown inverter is not made by Nikola himself.
First of all, the share price of Nikola Motor collapsed. Fred Lambert of Electrek, in any case, is taking Trevor Milton and Nikola Motor to court. He accuses him of deliberately deceiving allegedly functioning technology just to gain partners to finance his adventure. Fred then quotes in tweets an anonymous employee who had worked on the truck:
One claim in particular comes up, which shows in a video a Nikola One fuel cell truck in motion. As Trevor Milton now admits, the truck was not self-propelled, but rolled down a long, sloping road. At the time of the demonstration, no roadworthy prototype was available, but it was “in motion”. Here is the video:
In view of the lame counterstatement, which confirms the accusations of Hindenburg Research, there is only one question for us: What other lies has Nikola Motor told us?
What consequences will this have?
First of all, it is expected that partners Bosch, GM or Nel Hydrogen will start internal investigations and demand answers from Milton. If the allegations turn out to be at least as bad as they claim, Nikola Motors could implode very quickly. The start-up, which has just gone public, could thus have cost the investors a lot of money and Trevor Milton and the board of directors could find themselves in the dock. Hindenburg Research itself is not afraid to draw a comparison with Theranos, whose founder Elizabeth Holmes and her partner are currently on trial for a 700 million dollar fraud involving non-functioning technology.
For the development of fuel cells as a drive train for trucks, this could also prove to be quite a blow, if not the death knell for this technology.
This article was also published in German.