has a new detractor. And the stock felt it Thursday.
Hindenburg Research published a lengthy report Thursday morning detailing a list of problems the firm has with Nikola (ticker: NLKA). At its core, the report appears to reflect a belief that Nikola management overstated its internally developed battery and fuel-cell capabilities.
“Nikola announced [in 2019] it would revolutionize the battery industry,” the Hindenburg authors wrote. Nikola planned to buy new technology, but the deal, according to Hindenburg, fell through. “Nikola has never walked back claims relating to its battery technology. Instead, [founder Trevor Milton] continued to publicly hype the technology.”
Nikola shares fell 11.3% Thursday, closing at $37.57. That still leaves the stock up roughly 6% for the week. Shares surged 41% on Tuesday after the company announced a partnership with
The GM deal plays an interesting role in the Hindenburg report. GM is getting an 11% stake in the company and agreeing to provide Nikola with hydrogen fuel cells and batteries for its vehicles. GM will also be providing engineering support and will manufacture the company’s Badger pickup truck. Nikola will be responsible for sales and marketing of the Badger.
Wall Street wrote that the agreement validated Nikola’s business strategy and made its stock less risky. In one sense, Nikola, before the GM deal, was a bet of management’s ability to design and source batteries and fuel cells, and manufacture vehicles while building out a nationwide network of hydrogen filling stations to fuel its planned zero-emission heavy-duty trucks.
The deal might indicate that GM’s fuel-cell and battery technology is superior to what was being developed internally by the startup. The company didn’t comment on its R&D efforts, but did tell Barron’s in an emailed statement: “Nikola has been vetted by some of the world’s most credible companies and investors. We are on a path to success and will not waver based on a report filled with misleading information attempting to manipulate our stock.”
After the GM deal, Nikola has less risk related to battery and fuel-cell development, as well as manufacturing. The stock is still a bet on the company’s ability to provide low-cost hydrogen gas for its fuel cells. Nikola believes it can get the cost of hydrogen manufacturing below $4 a kilogram, a level that would make the fuel competitive with diesel.
Wall Street has raised some questions about Nikola’s battery technology. Cowen analyst Jeffery Osborne, for instance, commented on Nikola’s November 2019 claims that it developed a battery with twice the energy density of prevailing technology.
“In subsequent press interviews, it became clear that Nikola has only manufactured these cells with smaller form factor pouch cells relative to what is needed in a vehicle or truck,” Osborne wrote in his June research report. Nikola’s battery technology wasn’t ready for production.
Osborne rates Nikola shares Buy and has a Street-high $79 price target for the stock.
Hindenburg disclosed in its report that it is short Nikola stock. When going short, bearish investors borrow stock and sell it, betting on price declines. That isn’t unusual when short reports are published, but it does give Hindenburg a financial interest in seeing Nikola stock lower.
Niloka stock is still up about 230% since it announced plans to become a publicly traded entity through a merger with a SPAC in early March. The
Dow Jones Industrial Average
for comparison, are up about 6% and 11%, respectively, over the same span.
Write to Al Root at firstname.lastname@example.org and Max A. Cherney at email@example.com