Nikola jumps as automaker calls fraud claims false

Yahoo Finance's Emily McCormick joins Zack Guzman to discuss Nikola's rebuttal of short seller Hindenburg Research's allegations of fraud.

Video Transcript

ZACK GUZMAN: We are seeing shares in electric truck maker Nikola rebound after it was hit with a big sell-off after a short-seller published a research report claiming that the company was not living up to what it was telling investors. Today, the company releasing a statement, hitting back against a lot of those things that it calls false claims in a detailed report here.

And for more on that, as we see shares continue to move past the 10% gain in the afternoon trade, I want to bring on Yahoo Finance's Emily McCormick who has the details. Emily.

EMILY MCCORMICK: Good afternoon, Zack. And we are seeing Nikola this morning issuing a more comprehensive rebuttal of Hindenburg's short-seller report from last Thursday. It said in a statement today, quote, "These allegations by the short-seller are false and misleading and designed to manipulate the market to profit from a manufactured decline in Nikola's stock price."

Now, Hindenburg, of course, does stand to gain from a drop in Nikola shares because of its short position. And just taking a look here at this statement that Nikola put out today, I do want to highlight that while it is much lengthier than the relatively brief response it issued immediately last week, it doesn't necessarily refute every point that Hindenburg made in its short report. And that's something that the founders of Hindenburg actually pointed out in a statement to media as well.

So to run through a couple examples here of Hindenburg's claims and Nikola's response today, for one thing, Nikola disputed Hindenburg's allegation that it wasn't being truthful about making its own inverters. And those are a key component for electric vehicles. So Nikola said in its statement that it has been, quote, "designing, engineering, and working on its own inverters for quite some time. The company does use third-party parts in prototype vehicles, some of which may be subsequently swapped out for its own parts in production."

Now, to look back at what Hindenburg had said, that had alleged that Nikola's inverters were not proprietary to the company and had instead been using another company's components and then covering the label on that component to conceal the fact that they'd been outsourced. So Nikola shifting the narrative here a bit in that statement this morning.

And then also want to point out another thing that Hindenburg had said that's been capturing a lot of headlines, and that's Nikola's 2018 promotional video that portrayed a Nikola One prototype as functional when instead it had just been pushed up a hill and filmed rolling down that hill at an angle. That made it appear like the truck was driving on level ground. That's something that Nikola claimed had never stated, that its truck was driving under its own propulsion, although the truck was designed to do just that. So a bit of a discrepancy there between Hindenburg's report and Nikola's portrayal about what the truck was intended to do and how it was portrayed.

Now, as you mentioned, we are seeing Nikola shares up about 10% in intraday trading. It's making up some of the losses that it saw over the past three sessions following Hindenburg's report. This is going to be a continuing story here. Likely to see some volatility as investors continue to digest these reports and Nikola's rebuttals. Zack.

ZACK GUZMAN: Yeah, no, just insane moves to highlight that too when you think about the 50%-- almost 50% advance after that multibillion-dollar investment from GM. It gave all that back following the Hindenburg report, and now trading out flat since before that deal was announced. So interesting to track those moves.

For her part, GM's Mary Barra did say, we should note, that the company, GM, did its appropriate diligence before it signed that Nikola deal here, so further giving support to what we're hearing from Trevor Milton being true. We'll continue to see how it plays out. But, Emily McCormick, appreciate you bringing us that.