On the morning of September 8, 2020, Nikola stock holders woke to a pleasant surprise: the fuel cell company had made a partnership with General Motors. Together, they would build a clean energy vehicle to rival Tesla’s electric cars. The stock rose premarket by 20%, and about 39% that day. It would not last.

The proposed car, the Nikola Badger, was to be a fully-electric hydrogen fuel cell pickup truck. The partnership stated that Nikola would use GM’s Ultium battery system and a fuel cell technology known as Hydrotec. $2 billion in Nikola stock would give GM 11% of the company and access to GM’s empire of car parts. Nikola expected to save $5 billion on engineering, energy, and powertrain costs in 10 years.

Nikola sold the promise of green energy tech to turn their small company into a $20 billion start-up with a big 3 automaker deal. This was going to be GM’s answer to Tesla.

The only problem is, the technology did not exist.

The Next Theranos

On September 10, financial forensics firm Hindenburg Research released a detailed report alleging that Nikola’s public statements were fraud and that the miracle fuel cell technology they touted, for the most part, did not exist. It also raised the question about why Nikola, a clean energy company, would use GM’s Hydrotec technology for the fuel cells rather than its own.

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This was not the Hindenburg’s only accusation. The bombshell report compared called Nikola an “intricate fraud” and named Nikola founder Trevor Milton the Elisabeth Holmes of green automobiles. Holmes’ fraud, they pointed out, was able to maintain partnerships with major chain stores like Walgreens and dupe experts around the world. Holmes is currently awaiting trial for criminal fraud over her diagnostics company Theranos that promised on-the-spot results for many lab tests. Reports say she may claim “mental disease” to be the cause of her wrongdoing.

Similarly, the research suggests that Nikola’s technologies were mostly hot air. Press in both cases ate up stories about too-good-to-be-true technology. But scrutiny found the company’s public statement and press releases to be untrue.

Market Forces

Naturally, Nikola’s stock plummeted, just two days after its meteoric rise. By September 14, the stock was trading around $28, about half of its September 8 high of $54. It has yet to recover to pre-partnership levels.

Founder Trevor Milton went on the defensive, calling Hindenburg’s report “a hit job.” It is legal to short sell a company when discovering negative news as part of independent research. He implied that the report was motivated by price manipulation, not whistleblowing.

The Fake Empire Strikes back

After the report’s release, Nikola promised an official answer, which took about ten days and only raised further questions. For example, Hindenburg Research alleged that a truck in a promotional video demonstrating their green-energy engine was not driving at all, but rolling down a hill.

In response, Nikola admitted that the truck was not driving, but maintained that at no point in the video was it suggested that the semi was actually being driven, “under its own propulsion.”

The automaker’s statement also came before the Financial Times reported that Nikola outsourced the development of its “game-changing” battery. The company says they “set the record straight” in their official response, but there is no refuting or preempting of this later revelation.

Making the Front Page (of the internet)

Several independent analysts had been questioning Nikola for some time.

In a post dated three months before the GM deal, Reddit user Radiokali laid out several reasons they believed the company was fraudulent. This came after the stock price rose from $35 to nearly $80 in under four days. The jump was sparked by the announcement that reservations for the retail Badger Truck would be available. Radiokali was skeptical of this promise and even accused Trevor Milton of being the next Elisabeth Holmes (a common theme across the board).

The accusations were mostly circumstantial, but they do point out that Milton has extravagant claims of success, and extravagant wealth, having never directly produced a product.

While Nikola lovers abound, to find Nikola haters, one must visit the subreddit r/RealNikola, a forum dedicated to trolling the brand.

Ooh La Tes-La

One Reddit post on that forum accuses Milton of just being an Elon Musk copycat. Of course, the name of the company, Nikola, is just the first name of electric vehicle producer Tesla’s namesake, Nikola Tesla. But Milton has gone further, often comparing himself to Tesla CEO Elon Musk, and always coming out ahead.

One Forbes interview stands out in particular. In it, Trevor Milton claimed that Tesla fans loved Nikola, that Nikola was a pioneer in trucking, and Tesla was copying them, not the other way around. Milton made many other outrageous claims with no evidence, the post claims.

The CEO’s claims are mostly unsubstantiated. What is clear is that Trevor Milton is wealthy, a billionaire, and yet can stand on little more than hype (at least during his tenure at Nikola). The auto manufacturer right now has yet to sell any vehicles to the public, and certainly not a zero-emission vehicle, as the website claims.

Even if Milton’s statements were true, the parallels with Tesla and Elon Musk are a little obsessive. You could not found a University in 2020, call it “New Harvard University”, then claim that New Harvard came first. At least not without raising suspicions.

However, the strategy works. Plenty of articles ask if Nikola is “the next Tesla,” and some do even propose the technology is inauthentic vaporware. For better or for worse, Nikola is able to feed of Tesla’s success as investors want to get in Tesla-like gains (400% year to date).

Mainstream Naysayers

The SEC and a group of independent lawyers are currently investigating Nikola for fraud. Investor and hedge fund manager Whitney Tilson (who has been following the case closely) wrote in a newsletter that he could:

Confidently predict that General Motors (GM) will end the partnership with Nikola that it announced last week, Nikola’s stock will collapse, and Milton will end up behind bars for securities fraud.

If the allegations are true, it raises the question of why nobody saw it coming. And why did big investors, who are supposedly excellent business analysts, pour billions into a fraudulent company?

One answer is that they did see it coming, as evidenced by skeptics in Reddit and elsewhere. One Redditor had an insightful answer to why nobody had investigated Nikola before things got out of hand. Freespirit running said,

The market has no emotion. Money’s money. No one cares that this guy has a 35 million dollar mansion financed with stolen investor money when he just put $10k – $100k in their pockets. No one will care that the truck was vapor when they’re driving their new Tesla.

This kind of alleged fraud is reminiscent of the crypto space and altcoin sales. Companies create websites laded with false promises, only to skyrocket in value and be followed by copycats. This blow to Nikola suggests the gap between traditional finance and crypto companies is not all that large.

Meanwhile, Milton has been buying up his stock’s falling shares. The first hydrogen-fuel-cell vehicles by Nikola are slated to hit the road in 2022.

As the story unfolds, Trevor Milton is finding it more difficult to keep pace. On September 21, he resigned as CEO of Nikola, and on September 22, deleted his Twitter account.

As part of of his exit deal, Milton had to forfeit what was $166 million in stock last Friday, CNBC reported, but he was allowed to keep $3.1 billion in stock.