Just last week General Motors Company (NYSE:) announcing a strategic partnership with Nikola (NASDAQ:), giving it an 11% stake in the company. As part of the deal, GM will produce the Nikola Badger by the end of 2022 while Nikola also gains access to GM’s Ultium battery system and Hydrotec fuel cell technology.
“Nikola is one of the most innovative companies in the world. General Motors is one of the top engineering and manufacturing companies in the world. You couldn’t dream of a better partnership than this,” Nikola founder Trevor Milton said of the announcement.
Shares of both companies jumped on the news, with shares of Nikola gaining more than 40%. For Nikola, however, the enthusiasm was short-lived as the company for the rest of the week after being accused of being a fraud.
“Nikola is an intricate fraud built on dozens of lies over the course of its Founder and Executive Chairman Trevor Milton’s career,” Hindenburg Research wrote.
“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.”
The extremely detailed report has 53 questions for Milton to answer before coming to the conclusion that “Nikola is a massive fraud constructed on dozens of lies.”
“We have nothing to hide and we will refute these allegations. They have already taken up more time and attention than they deserve,” Nikola said in response.
“We have retained leading law firm Kirkland & Ellis LLP to evaluate potential legal recourse, including with respect to the activist short seller and any others acting in concert.”
Shares of Nikola obviously didn’t react well to the company being accused of fraud. Shares gave up all of their gains from the GM news and then some, ending the week more than 40% below the highs following the GM news on Tuesday. Shares of Nikola are now down nearly 70% from their high in June.
Well-known short-seller Citron Research agreed with Hindenburg Research’s assessment of Nikola, tweeting “Congrats to Hindenburg for exposing what appears to be a total fraud.” Citron also said it would cover half of all legal expenses Hindenburg Research may accumulate.
GM is standing by Nikola despite the allegations of fraud.
“We are fully confident in the value we will create by working together,” GM said.
“We stand by the statements we made in announcing the relationship.”
It appears Nikola will have a legion of detractors that believe the company is a fraud to deal with just like it’s larger rival Tesla (NASDAQ:) has had to for years.