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Hindenburg: Nikola ‘failed to address’ 43 of 53 questions

On Tuesday, Hindenburg Research released its response to Nikola’s statements about its fraudulent claims, saying the electric car company did not provide enough evidence to mitigate its skepticism. Yahoo Finance’s Alexis Keenan joins The Final Round panel to break down the charges and the case.

Video Transcript

MYLES UDLAND: But one stock that is lower today, that is Nikola. The stock is down about 8%. This coming after short-seller Hindenburg Research replied to the company's reply to their report saying that-- I think I have this right, Alexis Keenan, right? That the-- Hindenburg says Nikola admitted, basically, to securities fraud in their reply to the report. I think that is the best I can do to simply summarize where things stand right now. But what, indeed, is the latest on this quite messy saga now between these two parties?

ALEXIS KEENAN: Hi, Myles. I think you got it, so kind of a response to a response, if you will. So we're learning from "The Financial Times," just reporting now that the US Justice Department is inquiring into Hindenburg's fraud claims via the US attorney's office for the Southern District of New York, saying the agency has called people to discuss the company and the report's allegation in recent days. Also, "The Financial Times" saying that the SEC is in the early stages of investigating both the allegations in the report as well as Nikola's claims that the short seller is trying to just manipulate the market.

And so this all comes, in this response to response, Hindenburg coming back today saying that they reject Nikola's explanations that it came out with saying why its early promotional video of that Model One semi-truck prototype shows the truck just rolling down a hill, as opposed to operating on its own propulsion. Also, Hindenburg rejecting founder Trevor Milton's representations regarding the extent to which the company has built out, or which he said they built out, their hydrogen fuel network, noting a number of different claims, tweets, Facebook posts, and media interviews that Milton engaged in over the years since 2016.

Now, on its website, Hindenburg specifically accuses Nikola of securities fraud. They say given the public statements that Nikola was making at the time, we view the company's new admission that the Nikola One was not powered on its own in the video as a tacit admission of securities fraud. Hindenburg goes on to write this-- as acknowledged by the company's statement Monday, it has no hydrogen network and simply hopes to have one in the future. This, once again, strikes us as a tacit admission of securities fraud.

Now, Nikola, for its part, has said that these statements are false and misleading. It says it has brought its concerns about this report to the attention of the SEC and wants to fully cooperate with an investigation. Though, we are still waiting for a response from Nikola to these latest claims where Hindenburg has come back, anticipating those hopefully before the end of the day.

MYLES UDLAND: And I guess the question-- and I think this sort of played out a little bit yesterday. But for Nikola to say, great, we're going to try to bring the SEC in is sort of-- I mean, I didn't really know what to make of that, as a legal strategy, I suppose, when you say, OK, great, I'm just going to run right to the regulator that this short seller was trying to get the attention of in the first place.

ALEXIS KEENAN: Yeah, and in fact, this is a rare move. This usually doesn't happen. It happens sometimes. But perhaps Nikola feels that it has a very strong case, that it can back up all of the representations that it made. Perhaps it is strategy, wanting to get out in front and tell its story first. That's a possibility. Legal experts I've spoken with said that the SEC will definitely keep an open mind to both side's claims at the start of this. So they're going to hear them out.

But look, misrepresentations, if they're made before a company is public, when it's private, it doesn't make any difference to the SEC in the long run. They still can and will go after claims if they find that they would impact investors. Now, certainly, the SEC will have more motivation to go after companies that are in the public stages because now you have Main Street investors involved, whereas during the private phase, the investors tend to be, obviously, more sophisticated.