Nikola Motors' (Nasdaq: NKLA) story took some more twists and turns that are most appropriate for 2020. CEO and founder Trevor Milton resigned amid fraud allegations. The short-selling firm, Hindenburg Research published a litany of accusations.
Milton was replaced by board member and former General Motors (NYSE: GM) executive Stephen Girsky as Chairman of the Board. Some are saying that Milton's departure is a positive for the company as it can focus on execution rather than being surrounded by drama.
The most notable accusation was that Nikola faked a demo in a video by showing a truck rolling downhill and using camera tricks to make it seems like the truck was moving due to the motor.
The report was surprising since it came just after Nikola signed an agreement with General Motors to help build Nikola's electric pickup truck and supply battery and fuel cell hardware. Many saw this as a sort of institutional validation of Nikola's credibility, but this seems less likely in the past few days.
Recent Controversy
The company is enduring another controversy as Tesla (Nasdaq: TSLA) has accused Nikola of stealing designs for an electric pickup truck from Rimac Automobili. Tesla's filing is a response to Nikola suing Tesla for $2 billion in damages in which it accuses Tesla of stealing designs for the Tesla Semi from the Nikola One. Both vehicles have a similar appearance.
Rimac has designed and had electric truck prototypes since 2010 with a similar design. Tesla claims that Milton and Rimac's founders met numerous times, so Nikola can't have a valid patent.
Stock Price Impact
It's not surprising that these developments have resulted in steep losses for Nikola. In hindsight, it's crazy that Nikola got such a huge valuation while it's years away from actually producing trucks. Milton bragged about contracts he signed with truck companies who pledged to buy the trucks when they became available, but no money was put down, and no binding contract was signed.
Tesla's travails have shown us that scaling up production is no easy task. There's no guarantee of success. Milton had a knack for creating investor interest and selling a story. It was an open question whether he would be able to produce the trucks at scale and at a cost to justify the stock's over $70 billion valuation at its peak.
Nikola's stock is over 75% off its high from June. In contrast, other electric vehicle stocks have been trending higher. The intense selling and fraud allegations swirling around Nikola has resulted in other SPACs being met with selling.