Nikola faced fraud allegations upon announcing a $2 billion deal with General Motors, but GM doesn’t seem worried (GM, NKLA)

Trevor Milton

Summary List Placement

Just days after announcing a big-time deal with General Motors, Nikola last week came under attack from a short seller, Hindenburg Research, who published a wide-ranging litany of allegations under the un-subtle title “How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America.”

Hindenburg is Nate Anderson, and as far as I can discern, the firm is a one-man shop; this isn’t exactly Bill Ackman going after Herbalife in 2012, similarly maintaining that the company was a financial fraud (an illegal pyramid scheme, in fact). 

In his report, Anderson indicated that Hindenburg had taken a short position in Nikola, which went public earlier this year through a “blank check” SPAC deal and quickly minted a $3.3 billion market capitalization, generating a significant amount of chatter in the auto industry and on Wall Street. 

It’s not entirely clear that playing the market is Anderson’s mission; he seems to have adventured in a few hedge funds before co-founding his own, then starting Hindenburg in 2018. 

However, Anderson’s research was quickly endorsed by another short-angled research firm, Citron Research, run by Andrew Left, who joined a chorus of Tesla naysayers a few years back before reversing course and turning bullish on the company. Left had already talked Nikola down in June.

GM’s CEO stressed the automaker’s diligence on the deal

According to S3 Analytics, a firm that tracks short-selling, Nikola is now the ninth most shorted stock in the auto and construction sectors; Tesla, after an epic rally that commenced at the beginning of 2020, is No. 1.

GM’s deal with Nikola entails taking a roughly 10% equity stake, worth $2 billion, and becoming in effect a contract manufacturer for Nikola’s forthcoming Badger pickup truck — producing the vehicle both in all-electric versions, using GM’s new Ultium technology, and in a fuel-cell iteration. 

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But GM isn’t putting any money into Nikola, so for the automaker, the deal looks almost completely risk-less, save for whatever reputation damage it might suffer if Nikola falls apart.

At an RBC event this week, GM CEO Mary briefly remarked on the Nikola deal and later fielded a question from Joe Spak, RBC’s lead auto analyst, related to the dustup over the Hindenburg report.

“Our company has worked with a lot of different partners and we’re a very capable team that has done the appropriate diligence,” she said. “On the specific issues related to Nikola, I’ll let you … have that conversation with them. But on the strength of the deal we put together, it validates our technology, it allows us to have more people using the technology, which gives us the advantage of scale, which will help us drive costs down.”

The translation is that GM did its due diligence on Nikola and isn’t terribly concerned about research coming from a firm with a track record of going after relatively unknown growth companies. GM has also done deals with relatively unknown startups before; in 2016, it completed an acquisition of Cruise, which is …read more

Source:: Business Insider


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