Nikola Stock Tumbles Amid Fraud Inquiry

Nikola, the electric truck startup, has gained a name for itself in recent years as a rising star in modern transportation. But this week, it looks like the EV disruptor could be short-circuited.

Shares of the company were down 8% in pre-market trade on Wednesday, following news that that the Justice Department will join the SEC in investigating fraud allegations against Nikola.

According to The Wall Street Journal, the Justice Department’s inquiry will be run from the U.S. Attorney’s office in Manhattan, working in collaboration with the Security and Exchange Commission. The investigation results from a lengthy report by Hindenburg Research, which accused Nikola of an “intricate fraud.”

Fraud Allegations

Last week, Hindenburg Research, a short-selling investment firm, alleged that Nikola and its CEO Trevor Milton have been lying for years about their products and deals with other companies.

In a substantial report, Hindenburg claimed it “gathered extensive evidence—including recorded phone calls, text messages, private emails and behind-the-scenes photographs—detailing dozens of false statements by Nikola founder Trevor Milton.” The report later stated that Hindenburg had “never seen this level of deception at a public company.”

Additionally, the Hindenburg report accused Nikola of staging an “elaborate” sham when it rolled one of its prototype Nikola One trucks down a hill for a promo video. The use of gravity in the production of the video misled investors about the vehicle’s true capabilities, alleges the research firm.

Too Close to the Sun?

Prior to the fraud accusations, Nikola stock had risen more than 220% over the last 12 months. And just last week, it struck a $2 billion deal with General Motors, causing a 40% rise in share prices in a single day. But the news of the investigation has dampened that enthusiasm. Including Wednesday morning’s losses, Nikola has now seen a 45% loss since last Tuesday.

On Monday, the electric automaker released the following statement:

“nikola has contacted and briefed the u.s. securities and exchange commission regarding nikola’s concerns pertaining to the hindenburg report. nikola intends to fully cooperate with the sec regarding its inquiry into these matters.”

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