Nikola shares slide as SEC probes short seller’s fraud allegations

The electric truck start-up is battling allegations of fraud as investors start to shift away

Shares in electric truck manufacturer Nikola fell on Tuesday amid reports of a probe into the company by a US regulator.

It comes after claims by short-seller Hindenburg Research that Nikola engaged in “lies and deception” when showing off its electric vehicle technology to investors. 

Among Hindenburg’s accusations is that a 2018 promotional video was misleading because it gave the impression that a prototype was capable of being driven when the truck had in fact been rolled down a hill.

Nikola said on Monday that it never claimed the truck was driving under its own propulsion - although it had described the vehicle as “in motion” in social media posts and other communications.

The US Securities and Exchange Commission (SEC) is examining the short-seller’s accusations, which were published just days after General Motors agreed a $2bn (£1.53bn) deal with the start-up, Bloomberg reported.

Shares slipped almost 7pc to $33.30 in morning trading as investors worked through a statement from Nikola on the allegations. Since the original report emerged, the stock has lost a fifth of its value although the company is still worth $12.7bn.

Hindenburg stated that Nikola was built on an “intricate fraud” over the course of its founder Trevor Milton’s career. Nikola said that the allegations against Mr Milton were “false and misleading”. Last week, Mr Milton tweeted that he had “nothing to hide”.

The research company said it had gathered evidence, including phone calls, text messages, and behind the scenes photographs that detail “dozens” of false statements made by Mr Milton.

“We have never seen this level of deception at a public company, especially of this size,” the report stated.

“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,” Hindenburg stated.

“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 $20m over two years. Milton has laid the groundwork to extract hundreds of millions from Nikola years before ever delivering on his promises.”

In response, Nikola said that the report was designed to provide a “false impression to investors and to negatively manipulate the market in order to financially benefit short sellers, including Hindenburg itself”.

Nikola has also outlined “dozens” of inaccurate allegations made by Hindenburg.

“Nikola has contacted and briefed the SEC regarding Nikola’s concerns pertaining to the Hindenburg report,” the company said. “Nikola intends to fully cooperate with the SEC regarding its inquiry into these matters.”