Nikola Is Facing An Investigation

Nikola Is Facing An Investigation

over 3 years ago2 mins

Mentioned in story

Nikola reportedly faces an investigation after a major activist investor accused the electric truckmaker of being too good to be true 🔎

What does this mean?

Nikola hit most people’s radars for the first time in June, when its surging stock pushed its valuation above carmaking veteran Ford – even though it, uh, hadn’t actually produced a single vehicle commercially 🚙 It gained another burst of publicity just last week after announcing a $2 billion deal with General Motors.

But now – in a story that’s been building for a few days – the activist investor Hindenburg Research has accused Nikola of dozens of transgressions, like overstating the abilities of its early prototype trucks 👉 That didn’t go down well with the truckmaker, which asked a major US regulator to investigate Hindenburg. And that didn’t go down well with the regulator, which reportedly turned its attention to Nikola’s operations instead…

Source: The Wall Street Journal
Source: The Wall Street Journal

Why should I care?

Activist “short-sellers” like Hindenburg openly aim to profit by placing bets that a company’s stock will fall, and then publishing details of its supposedly shifty dealings. This high-risk strategy pays off if the world takes their side, but it can also backfire if the company proves them wrong 💨 Little surprise, then, that opinion is split on them: some see them as parasites driving healthy companies into the ground, while others see their work as an essential function of capitalism.

The hype-filled world of electric vehicles – where often-unproven tech vies to grab a slice of a lucrative market – draws short-sellers like moths to a flame 🔥 Around 7% of Tesla’s stock is on loan to short-sellers, who sell the borrowed stock and hope to buy it back cheaper in future. If they’re wrong, of course, they might suddenly be forced to cut their losses and buy the stock prematurely – in turn causing the price they hoped would fall to rise.

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