Nikola Corporation – Shorting the H2 fraud

Nikola Corporation Inc formerly known as Nikola Motors Inc is the brain child of Trevor Milton, that back in the 2020 EV mania was able to ride the coattails of Tesla success, and parlay an ocean of lies into a SPAC listing, and… drum roll… a peak valuation of 34 billions back in the day.

You can get read Nate Anderson‘s Hindenrberg report (oh the irony) that brought the stock down to reality, and there are lots of highly entertainment videos exposing Trevor Milton lies that ultimately got him a federal jail sentence for fraud.

The company is still valued at 800 millions valuation, and keeps “Pushing the boundaries of possibility”.

Since SPAC (data in public SEC reports) net losses are rising each year in the last fiscal year almost reach 1 billion in losses:

Net Loss
values in millions

Nikola has launched 1 commercial product, the Nikola Tre, a semi-truck with a cab over design with chassis sourced from Iveco, available in two versions, the Tre BEV with a fully electric battery power train, and Tre FCEV running an hydrogen fuel cell power train. Final assembly in Coolidge AZ.

Why a new small hydrogen truck builder company is not 100% focusing, well on hydrogen trucks...? Splitting its resources, between two technologies, with parts sourced from all over the world to final assembly in Nikola’s Coolidge facility in the Arizona desert is a logistics nightmare.

Well this a vestige of Mr Trevor Milton, lying, sorry hyping! the stock back in the day, with products unveils such as the Nikola Badger an F-150 truck promised to be faster than a Lamborghini yet cheaper than a VW Golf, the Nikola NZT an ATV for the explorers and a military version, and even an electric jet-ski the Nikola Wav. Nikola was going to make it all for everyone. Land, sea, electric, hydrogen, you name it.

All of those concepts, renders and prototypes obviously CANCELLED, never reaching near production.

Going back to reality, and the product that actually reached production… the BEV version production has been halted due to pack manufacturing deficiencies detected after two under hood fires initially traced to coolant leaks in the battery packs. According to the latest filings:

BEV Recall Campaign

On August 11, 2023, the Company announced a voluntary recall of its BEV trucks… The incident was deemed likely caused by a defect within components of the supplier battery pack. The Company… has determined that replacement of the battery pack in all BEV trucks is the safest, most cost effective remedy. All BEV trucks have been transported to the Company’s manufacturing facility to be retrofit with alternative battery packs….. As of December 31, 2023, the Company accrued $65.8 million related to the recall campaign, of which $3.0 million has been incurred through December 31, 2023 for the BEV trucks that are expected to be returned to dealers and their retail customers once the recall work is complete.

Nikola Corporation 10K Annual report for year ending December 31, 2023

So, they are still in the early stages of solving this problem, so for the foreseeable future there will be no BEV sales. This is also very concerning for the FCEV safety, because 10’000 PSI compressed hydrogen is no joke. If there is some half hasted engineering issue, things can get explosive.

It’s quite a bullet to bite for customers to buy products from a pre bankrupt company, plagued by a shady lying founder, fire hazard in their first products shipped, and so much unknowns about hydrogen costs, network, technology and safety.

Sales have been lagging and no sign of mass production achieved.

semi-trucks shipped in units

Gross profitability is so far way it’s not even a mirage. The gross loss tripled to a staggering 1.87 million per unit shipped….

RevenuesCost of RevenuesGross Loss Gross Loss
per Unit Shipped
values in millions

With an accumulated deficit of 3.071 billions (ouch….), 464 millions of cash on hand, and 555 millions in liabilities, nowhere close of mass production or profitability, the company is in dire straits, at current cash burning rate it’s not possible to maintain operations for two quarters.

So, Nikola will do what it does better, sell more stock to investors:

Weighted-average shares outstanding (3 months ended Dez 31)
shares in units

At current rates of operations, and at .60 cents a share, to raise the projected 500 millions needed to reach end of year, a whooping 833 millions of new shares must be issued and bought by investors.

The question is, will investors back this company again, again and again?

Insiders, at current low share price are in a dumping spree, showing little to no faith in the company future.

Chief Operating Officer – Mary S. Chan sold 24 627 shares at 0.6806 on 05/03/2024
Chief of Human Resources – Joseph R. Pike sold 75 162 shares at 0.6806 on 05/03/2024
President of Energy – Dirk O. Hoefelmann sold 5100 shares at 0.6806 on 05/03/2024
Chief Legal Officer – Worthen M. Britton sold 109 980 shares at 0.6806 on 05/03/2024

and the list goes on for quite a while… please consult the mandatory form 4 SEC filings about changes in beneficial ownership of securities for the full list of insider transactions.

The biggest stakeholder in Nikola at end of 2023 is the Norwegian people, owning 107,033,812 shares, and represented by these guys:

You can’t make this up, almost as cringe as their Nikola holdings… these are the good people of Norges Bank Investment Management responsible for the investment decisions of the Government Pension Fund Global.

The Government Pension Fund Global was established after Norway discovered oil in the North Sea. The fund was set up to shield the economy from ups and downs in oil revenue. It also serves as a financial reserve and as a long-term savings plan so that both current and future generations of Norway get to benefit from our oil wealth.

Norges Bank

A fund worth about 1.5 trillions with equity in about 9,000 companies world wide, owning 1.5 percent of all listed companies, the 100 millions stake in Nikola represents 0,0067% of it.

But even so I wonder if due diligence was actually made. I don’t want to discuss here the merits of hydrogen as a power source for the future. This is a long discussion on efficiency, cost, safety, infra-structure and so on.

In my mind there will be a future for hydrogen, it’s a compelling technology for big oil and governments because it sustains the current centralized model of energy distribution and taxing. And probably, for some niche needs will be the best choice. But overall with much less percentage in the energy business mix that the average Joe assumes it will be for the next couple of decades.

I’m firmly convinced that Nikola Corporation lacks technical skills, management capability, and capital efficiency (noting that it burned 3 billion dollars to ship only 245 units since the SPAC in 2020) to be a player in the so called hydrogen economy. Current shareholders will be massacred in the foreseeable quarters with losses upon losses, and dilution and more dilution. Reverse split, de-listing to OTC, and chapter 11 bankruptcy are all strong possibilities in the next 24 months.

Usually I don’t short companies, I don’t like to earn money on other people failures. But this shady company, the lying fraudster founder and complicit management, the greedy investors that bought in because “Nikola is the next Tesla” or “Hydrogen is the future” sound bytes, ignoring all the red flags. Well… I can make an exception for this one, and short it no problem.

The inefficiency these kind of shady companies bring to the market, inflating the supply chain and labor, competing for resources that otherwise could be assigned to an efficient and ethical company. Burning capital and more capital without no criteria or results. This is all typical of market bubbles, as the 2020 EV stocks mania, but the market always takes over and prevails. The market is healing, and Nikola must die to finish the process.

Warning – Don’t touch

In my mind there is no doubt the future of betting is on the blockchain. Anonymous, transparent, fully verifiable, trustless, without banks or governments interference.

As an investor I’m doing my homework, testing and benchmarking several crypto betting projects, and sure enough one of them is the “private, no limits sports book”. Brainchild of David Mah, it has some intriguing tokenomics and value coupling, but yet some red flags (very few updates in GitHub probably the biggest red flag of them all).

In the benchmarking process I’ve come across with the capital sin for a betting project, doesn’t conform to the events outcome. So, you can bet in a sport event and even if you predicted correctly there is the possibility it doesn’t pay the winnings.

I staked 10000 wgr at 1.25 odds on Islam Makhachev win vs Alexander Volkanovski. It was a successful prediction, as indeed Makhachev won the fight, yet the wagerr network deemed this as an Event Refund ?? You can actually check this in the wagerr blockchain explorer:

Other big no no of is the long time it takes to settle a bet, it can be days, weeks or some times simply indefinitely, your bet funds get locked and you neither can’t cash in or use them for other bet.

Here it is an event, UFC 283 where I placed a bet on Gilbert Burns vs Neil Magny and as by this writing (one and half month later the event took place it’s still not settled), still waiting for oracle, so the funds of that bet are locked and can’t access or use them. Again we can confirm this in the blockchain explorer:

this has now actually been payed, curiously 3 days after publishing this post, so an event on the 21 January, was payed after 46 days, with the funds retained on chain all this time.

There are other problems identified with wagerr, but these are horrible and total showstoppers. I have used the traditional support channels, discord server and twitter, to get help about these with no success.

Expect in the following weeks a post with the crypto bet projects wild wild west benchmark and concluding recommendations. But, my simple advise for both bettors and investors is: DON’T TOUCH WAGERR.COM, not even with a 10 meter pole, you will only loose.

Transportation 2.0

This post is on drafts now for about 2 years, it’s a concise summary of my Tesla investment thesis. My mental carburetor chocked at AI and autonomous driving… and guess what? I still have a shallow understanding of machine learning, neural nets, PyTorch, TPUs and all the technical stuff to deep dive into the AI stuff. And bear with me this stuff is crucial in my mind rational as Tesla’s business model is like a Trojan horse to deploy autonomous driving.

BUT no way that I could overcome my technical limitations… SO this post could stay in Drafts indefinitely, OR just like a IRL conversation with friends (congrats for the ones that actually invested) just wrap it up, and put out the general ideas to all my friends that unfortunately don’t have the opportunity to meet IRL so often.

Disclaimer: this is just my stream of consciousness, do not to take it as financial advise. DO YOUR OWN research and thinking. This can be the ramblings of a insane mind.

Humans, are quite an unsuccessful species about self conservation. We have a (declared) stockpile of nukes to destroy the total earth landmass SEVERAL times. The most important leader today doesn’t “believe” in climate change, and most of the others humans happily let the poison of the atmosphere, the water and the land to continue despite all the warnings.

Imagine a visitor from another world looking at this madness, probably we would be cataloged as “Technological savvy but totally schizophrenic species”. One must ask what legacy are we leaving to the next generations?

Anyway let’s be optimistic, continue the exercise and indulge into random thoughts and speculations about the future. Look and behold when one day the measure of computer RAM will be not in gigabytes, but in terabytes.

Transportation 2.0

There is a revolution about the way people and cargo move around, probably the Jetsons flying car is not coming around soon (or probably it is in the form of electric VTOLs), but billions and billions are being spent into electrification of vehicles.

And this an extremely good thing, because a big chunk of total world CO2 and pollution is generated by burning stuff inside ICE (internal combustion engines), and the BEV (battery electric vehicle) is so much more efficient that it’s operation is much cleaner. And as the power grid gets greener with more renewables in the mix, the overall gap just gets bigger and bigger.

There are two metrics about batteries that don’t lie, the energy density Wh/L and the cost USD/kWh, and the trend is simple for both, higher energy density and less cost every year. It’s nothing at all like Moore’s law, much slower, but even predicting a very conservative 5% increase in density and 5% decrease in price every year, around 2050 (perhaps much sooner considering the massive resources allocations) BEVs will have the equal energy density at a fraction of cost of ICE. Factoring in the difference in engine efficiency, supply chain, and environmental impact, probably much sooner than 2050 will be the end of the ICE age.

Perhaps in a far future there will be internal combustion engines in museums showing the exquisite materials and craftsmanship of a time that the world was powered by an ordered symphony of tiny explosions. I imagine like something like a starting up and revving up event with all the attendees in highly protective gear…

Sometimes i see this video (that as quietly been deleted from everywhere, but the Internet never forgets) of Jim Cramer on CNBC about Tesla IPO just for the comic entertainment value:

It’s so funny, this was June 2010, each TSLA share was selling at 17USD (1.13 USD August 2022 split adjusted…). Guess the market had different view… why was Jim Cramer so wrong?

Tip of IcebergBecause he couldn’t understand inside his primate brain that the real transportation revolution is not the transition from liquid fuel to electric. No, that is just tip of the iceberg, the real revolution that’s going to turn everything upside down, it’s autonomous driving.

Think of all business around moving people and cargo, think of all the payrolls for professional drivers, think of all social security for professional drivers, think of all the road fatalities, think ride sharing and no ownership, think of long distance truck hauling, think of your car leave you on the spot and then proceed to park itself, think about drinking a coffee and finishing that report on your boring morning stop and go commute, think about going home drunk with no problem at all, think about catching some sleep on that long journey, think about elderly or disabled people who want to continue to go places by themselves…. etc, etc, etc…. it’s going to be a beautiful new world.

How much does it worth to have a total autonomous car system that can drive better than the top human drivers? That can operate 24/7 and doesn’t get tired, sleepy, drunk, nervous, over optimistic or distracted? A lot, really a LOT.

The race for the jackpot is on, with billions and billions being invested now. And where there is strong competition there will be results, and here Moore’s law is king, so expect this future to be nearer than generally expected. The company in the pole position is Tesla, and if they can deliver first probably they will become one of the most valuable companies in the world, probably the most valuable company in the world as autonomous driving implies solving computer vision, and computer vision achieved unlocks much more than autonomous driving.

Pushing forward deep into the future. We can ask this question, when an autonomous vehicle will be say 10x, 20x, or 100x safer than an average human driving, will human driving in public roads should be even allowed? Guess not, so I bet a lunch in the best restaurant in town with everyone that accepts the bet, that in 100 years from now human driving in Sweden (or Norway) will only be allowed in closed circuits (lets us hope the Nurburgring is still up and running).


1951 First AI program
1956 Los Alamos chess is the first program to play chess
1997 Deep Blue defeats Garry Kasparok
2007 Checkers is solved paper published
2015 Baidu Deep Image outperforms average human in image sorting and recognition
2017 AlphaZero learns chess self playing itself 24h and crushes the strongest chess AI
2017 AlphaGo beats Lee Seedol in the game of Go (10^170 valid board configurations)

as we can see with these few examples the machines are learning, and are learning more complex tasks and are learning faster. As of now machines are already at super human level at many  tasks.

Sure driving is a task that one must parse several complex inputs  (vision, sound, proper acceleration) and compute with context real time outputs (turning, accelerating, braking), but there is nothing magical or physical impossible for a machine to perform, and perform well better than an human.

Assuming hardware will keep improving offering better performance at lower price each year, and computer science AI and machine learning will also keep improving over time, there will be a point in time that these factors will compound and intersect to unlock autonomous driving, and Tesla with silicon valley tech know-how, best engineers in the world,  huge fleet collecting real world data for training the neural networks, own chip designed specifically for artificial intelligence, etc, etc… will be (in my mind) the one company to unlock it first.

According to Tesla 2021 2q safety report, they recorded one crash for every 4.41 million miles driven in which drivers were using Autopilot technology (Autosteer and active safety features). For drivers who were not using Autopilot technology (no Autosteer and active safety features), they recorded one crash for every 1.2 million miles driven. By comparison, NHTSA’s most recent data shows that in the United States there is an automobile crash every 484,000 miles.

Some of the typical questions i have been asked IRL about the thesis:

Won’t legacy auto crush Tesla by sheer volume?
Well if that was to happen, it should have happened many moons ago. Tesla is a big boy now, growing fast with probably the strongest balance sheet in the industry. Besides legacy auto strength is in metal casting and folding, it can’t even put up a decent infotainment system… much more develop an autonomous driving system.

Besides legacy auto is in a world of pain, declining sales, convert factories and human resources to electric powertrains, battery supply, huge debts…. they are giants on clay feet.

OK, but the actual stock value has already risen tremendously, didn’t I missed the boat?
It’s a fact, the stock price already skyrocketed. If you invested 1000 USD back in the IPO and hold it (Jim told you to sell… big shout out to Jim) you would have today around 200.000 USD…

You can make a solid case to justify the current valuation on current business alone, you can go trough profit margins, growth rates, CAGR, ROI and other financial indicators, you can value Elon Musk as the modern Edison, but for me the equation is really simple, if you can envision a near future with autonomous driving with Tesla leading, the valuation is cheap. If you can’t envision this, probably the valuation is more on the pricey side.

I’m not a big fan of reasoning by analogy, but I must also point that for disruptive companies, companies that change the world, with strong leadership and mission, companies that enter a positive loop feedback system it doesn’t make much sense to cap an upper limit.

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” – Benjamin Graham