Two federal agencies are probing into electric-car startup Nikola, after short seller Hindenburg released a report claiming Nikola committed securities fraud. Yahoo Finance's Alexis Keenan and Zack Guzman discuss.
ZACK GUZMAN: Want to spotlight shares in electric truck maker, Nikola, today. Trading about 1% higher after some whipsaw moves. It's been a busy past few couple of days here, and we're talking about accusations from short seller Hindenburg Research against what this company put out in terms of their progress on moving towards manufacturing an electric truck, as well as an investment from GM. It's been up and down, and the SEC looking into them, among others. And here to discuss all of that with us and how serious of a challenge this is for Nikola, is Yahoo Finance's Alexis Keenan, who has more on all of that. Alexis.
ALEXIS KEENAN: Zack, so yeah, we're hearing reports this week that both the DOJ as well as the SEC have expressed interest in the short seller report from Hindenburg Research claiming that Nikola committed securities fraud. So a serious allegation there. No word yet though whether either of those agencies have launched an official investigation, something that we'll be certainly looking out for.
Now the agencies, they're not obligated to investigate, but if they do, A, they're going to see what we are seeing right now and what Hindenburg has published. But in order to get more information, they would need subpoena power, and that would require an official investigation. Absent that, not going to be able to dig much deeper at this point.
But I do want to show you an example of at least one of the claims that this short seller is making. Most of the claims attack representations by the company, as well as by its founder, Trevor Milton, by way of company video, social media, interviews with media. So let's take a look at one. This one is from December of 2016. This is from an unveiling event from Nikola of its first prototype, the Nikola One. Take a listen.
TREVOR MILTON: For every doubter out there that said that there's no way this is true, this is a real truck. This is not a pusher.
- So how long have you been working on this? Because this is a fully functioning truck right here that we're sitting in.
TREVOR MILTON: Yeah.
- So how long have you guys been working on this?
TREVOR MILTON: This isn't just a pusher, like a lot of vehicles that they unveil or just vehicles that don't actually function. This is a fully functioning vehicle, which is really incredible. You go through, you can, we can change out pretty much everything we want, all the temperatures. I mean, this is a fully functioning vehicle. It's not just a, it's not just a pusher. This is what they call in the automotive world, a vehicle that they just push and it doesn't move.
ALEXIS KEENAN: publication of that Hindenburg report, Nikola did concede that that same truck that was also shown in a promotional video, I think we have a look at that as well, about a year later in 2018, that one appeared to be just rolling down a hill in that promotional video and not actually operating on its own propulsion.
So that really calls into question whether Milton's statements and these representations about its product being fully functioning, whether that rises to the level of fraud, securities fraud or otherwise. Now the company at the time, was still private. But as far as the SEC and as far as the DOJ is concerned, it doesn't matter. You can certainly commit misrepresentations and omissions that amount to fraud as either a public company or a private one. Zack.
ZACK GUZMAN: Yeah, and obviously, you heard him stress that it wasn't a pusher a few times in that clip, oddly, a number of times. But obviously, hindsight 20/20 here looking back on all that. But Alexis Keenan, appreciate you bringing us that.