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A report accusing electric truck startup Nikola Corp. of fraud has set off a firestorm of counteraccusations, threats of legal action and wild stock price swings. Concern about how it all shakes out could spread to the wider field of aspiring electric vehicle makers, including General Motors Co.

Nikola, based in Phoenix, has been considered a rising star in a newly crowded field of battery-electric and fuel cell-powered trucks. It started last week with a big splash after announcing GM had agreed to a $2 billion stake in the company, including access to GM’s engineering and manufacturing muscle (Energywire, Sept. 9). Nikola has never sold a vehicle, but it has struck deals to supply thousands of zero-emissions trucks for companies like Anheuser-Busch Cos. LLC and waste management firm Republic Services Inc.

Then, in a report published Thursday, a New York-based financial research firm excoriated the company and its executive chairman, Trevor Milton, alleging they had repeatedly used elaborate staging to mislead the public, investors and company partners about the capabilities of Nikola’s prototypes.

Nikola is “an intricate fraud built on dozens of lies,” wrote the firm, Hindenburg Research.

Hindenburg alleges Milton had falsely branded a natural gas truck as “zero-emissions,” claimed the prototype of its Nikola One hydrogen-powered semitruck was “fully functional” when it was not, and unveiled videos of the truck “in motion” while, according to Hindenburg’s research, neglecting to mention it was simply rolling down a hill. Similar assertions were originally made by a Bloomberg News article in June.

Nikola’s boss, according to Hindenburg’s research, had also exaggerated the company’s progress on producing low-cost hydrogen for fueling stations. The company hired inexperienced staff, including Milton’s brother, to oversee the development of stations.

“We have never seen this level of deception at a public company, especially of this size,” said the note to investors. “We think Nikola’s partners did not do their homework.”

Hindenburg, named for the fiery crash of the German passenger airship over New Jersey in 1937, acknowledged having a short position on Nikola stock. That means its financial positions in Nikola would benefit from a declining stock price.

The allegations dealt an immediate shock to Nikola’s stock value, which had plummeted nearly 15% by the time markets closed Friday afternoon. And the editor-in-chief of Electrek a website that has often written skeptically of Nikola, predicted it would be the “beginning of the end” for the company.

“Im calling it now. Nikola is done,” wrote the editor, Fred Lambert, on Twitter.

On Friday morning, Nikola threatened legal action against Hindenburg over the report, calling it “a hit job” and promising to alert authorities at the Securities and Exchange Commission.

“We have nothing to hide and we will refute these allegations,” the company said in a statement posted on its website, accusing Hindenburg of attempting to “profit from a manufactured decline in our stock price”.

In an email to E&E News, Nikola said “the matter is currently with the SEC,” without elaborating.

Weathering the storm

Some analysts likened the affair to Tesla’s skirmishes with short sellers, whose predictions have drawn venomous retorts from Tesla Inc. co-founder Elon Musk.

“The report definitely creates a problem, but it’s not insurmountable,” said Brian Moody, executive editor at Autotrader.

“If Nikola has the tech, trucks, assets and resources they claim, they can weather the storm just as Tesla has many times,” he added.

But the new scrutiny on whether Nikola’s fuel cell products will ever materialize may also sow distrust among investors toward other EV startups, making it harder for them to scale up. Tens of billions of dollars has flowed to companies in recent years based on the premise that Tesla is only the tip of the clean transportation iceberg.

To the extent that the allegations complicate progress for Nikola, it may also slow development of low-carbon versions of long-haul trucks.

Relatively few manufacturers are focusing on developing semitrucks with long-haul capabilities, which ideally involves equipping the vehicles with upward of 700 miles of range, noted Jimmy O’Dea, senior vehicles analyst at the Union of Concerned Scientists.

“Nikola has established a strategy for long-haul trucks that some of these other companies haven’t gotten to yet,” said O’Dea.

Under new sales mandates in California for trucks and other heavy vehicles — a regulation that other states have pledged to adopt, as well — 40% of all tractors must be zero emissions by 2035. That categorization includes several heavy-duty truck types, meaning manufacturers wouldn’t necessarily have to sell long-haul varieties.

If that weren’t the case, “the report would be much more alarming,” said O’Dea. Still, the long-haul sector is “a very large fraction of truck emissions and vehicle miles traveled. So it’s very important we think about zero-emissions technologies for that sector. And Nikola has been one of the few companies that’s positioned themselves for that.”

Julie Huston-Rough, a spokeswoman for GM, said in a statement to E&E News that the company stood by the statements it made in announcing its investment in Nikola. GM is “fully confident in the value we will create by working together,” she said.

On Friday, Milton fumed on social media, writing in one Twitter post that he may “have to start being more ruthless to stop the lies they spread.”

“It is all about money and greed and not the truth,” he wrote in an additional post. “But that is ok we have nothing to hide and will address each lie they put out.”