"We believe Nikola is an intricate fraud built on dozens of lies over the course of its Founder and Executive Chairman Trevor Milton’s career,” Hindenburg wrote in a report released Thursday, citing phone calls, text messages, emails and photographs.
Startups such as Nikola, which rejected Hindenburg's claims, are more vulnerable to short-sellers since they lack a long track record on which investors can make judgments.
The sharp surge in the company's shares after the GM deal was announced may have exacerbated that, widening potential profits from bets that the shares would fall.
“We have never seen this level of deception at a public company, especially of this size,” Hindenburg contended.
Short-sellers often publish negative claims about a company in order to drive down its share price and boost their own profits. Hindenburg said it took a short position in Nikola after conducting “extensive research.”
Shares of the Phoenix-based electric truck maker plunged by as much as 13% following the report’s release, before slightly paring their losses.
Milton, the Nikola founder, called the report a “hit job” and said it was done to “slam” shares of the company which had seen its market capitalization soar to $16.06 billion at Wednesday’s close, up from $340.86 million on June 3, the day of its Nasdaq debut.
"Nikola has been vetted by some of the world’s most credible companies and investors,” a company spokesperson said in a statement. “We are on a path to success and will not waver based on a report filled with misleading information attempting to manipulate our stock.”
Hindenburg, meanwhile, attributes the surge in Nikola’s market value to Milton misleading partners about the company’s proprietary technology.
Nikola announced last year announced it would revolutionize the industry with an acquisition that would help produce a battery cell less than half the weight and cost of the lithium-ion batteries used by competitors.
The deal fell through after Nikola realized the technology was still a concept and after discovering the company’s president was earlier indicted on a charge of using his NASA expense account to hire prostitutes, according to Hindenburg.
Nikola never took back its claims and instead Milton continued to hype the technology, Hindenburg said. Milton has made numerous other claims about its technologies that Hindenburg claims are false.
Now, Nikola will use General Motors’ battery technology as part of the agreement that was reached on Tuesday. The arrangement said GM will receive $2 billion of newly issued stock, or an 11% stake, for helping build battery-electric and fuel cell-electric models of Nikola’s Badger pickup truck.
“We are fully confident in the value we will create by working together,” a GM spokesperson said in a statement. “We stand by the statements we made in announcing the relationship.”