The U.S. Department of Justice has opened a preliminary investigation into Nikola, an electric truck and off-road company, for misleading investors and shareholders by making exaggerated promises about its technology, according to the Wall Street Journal. The Department's investigation would be the second after that of the SEC, the US government agency that watches over the stock market, and comes after a group of investors last week published a 67-page report calling Nikola a “complex scam” .
The group of investors is called Hindenburg Research and does “short selling”, a practice that consists of betting against a company to make money when its stock falls. Hindenburg Research therefore has an interest in looking for weaknesses in Nikola's business; the company has denied all allegations, but despite this, its shares have dropped by many points in the past few days. Trevor Milton, Nikola's founder and CEO, stepped down today from his role as chief of the board. He was immediately replaced with Stephen Girsky, former vice president of General Motors.
Founded in 2014, Nikola has achieved great success among investors in just a few years, and has raised a lot of funding until it went public in June of this year. Today Nikola is worth about 12 billion dollars, he wants to expand into the energy sector and also produce hydrogen cars. The company unveiled four electric truck models, some of which are expected to be produced in collaboration with General Motors, and an electric pickup model. So far, however, Nikola hasn't produced a single vehicle for the market. That's not necessarily a worrying sign – it takes time to build an innovative auto company from scratch – but there are some signs of trouble.
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A few days ago, for example, Nikola admitted that a promotional video circulated in 2018 – in which an electric truck was traveling along a road in the middle of the desert – was actually false: the truck did not go by itself, the road was slow. descent. The Financial Times published an article in which it writes that “the vagueness of Nikola's technology has generated comparisons with Theranos,” the biotech startup that failed in 2018 because its innovative products did not actually exist or did not work. In other passages, however, the article cites sources according to which certain Nikola technologies could be solid, such as those related to hydrogen. Mary Barra, CEO of General Motors, said this week that she doesn't want to dissolve the deal with Nikola.
Nikola is an interesting company because it is part of a small group of startups in the automotive sector that for some years have been looking for unconventional – and sometimes clumsy – methods to repeat the success of Tesla, the electric car company led by Elon Musk: in the Nikola's case, the inspiration is explicit right from the name. Musk managed to create commercially successful luxury electric cars despite having no experience in the sector and despite enormous technical difficulties, which for years made mass production difficult. This alone is not a great result: by now all the major car manufacturers have produced or have in production electric cars, even high-end ones.
Tesla's most notable achievement has been to be seen, by the public and the markets, as a technology company and not an automotive company, which enjoys the trust and enthusiasm usually generated by companies such as Apple and Google on the stock market. Tesla today has a higher market value than Toyota, even though it only sold 367,200 cars in 2019 compared to Toyota's 10.46 million.
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Another company trying to emulate Tesla is Evergrande. Evergrande Group is a very rich Chinese conglomerate that mainly deals with the real estate market, and which in 2017 had invested two billion dollars in Faraday Future, at the time one of the most promising electric car startups. The deal with Faraday Future ended in a bad fight with Jia Yueting, the billionaire founder of Faraday, who in a few months had burned 800 million dollars given by Evergrande in bad investments.
But Evergrande has decided to continue producing electric cars just the same. It has invested an additional $ 3 billion in the industry and announced in August this year that it is ready to market six new Evergrande-branded electric car models. This week a group of investors that includes Chinese tech firm Tencent and billionaire Jack Ma, founder and former CEO of Alibaba, said they will buy $ 500 million of shares in Evergrande New Energy Vehicle Group, the subsidiary that deals of electric cars and which in 2019 lost 620 million dollars.
