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
2023966.282
2022784.238
2021690.438
2020384.273
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.

BEVFCEVTotal
20237935114
20221310131
2021
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
202335.839249.906214.0671.877
202249.725135.69485.9690.656
2021
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)
20231,078,090,959
2022487,551,035
2021407,448,311
2020385,983,645
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.