In a rollercoaster day for Nikola, the company’s shares slumped after the close following a Bloomberg report that the SEC has started an examination of the company to “assess the merits” of Hindenburg’s allegations that the company is an “intricate fraud.” The news sent NKLA shares down 4% after hours.
Ironically, this means that the company’s founder, Trevor Milton, has gotten his wish: Nikola pulled a Wirecard and encouraged the laughably toothless SEC to get involved to settle the report claims. As reported previously, the Phoenix-based company said it reached out to the SEC to discuss its issues with the Hindenburg report, and ultimately held a call with agency officials on the morning of Sept. 11. Nikola says Hindenburg was attempting to profit from a “manufactured decline” in its share price.
“Nikola has contacted and briefed the U.S. Securities and Exchange Commission regarding Nikola’s concerns pertaining to the Hindenburg report,” the company said in a Monday statement. “Nikola intends to fully cooperate with the SEC regarding its inquiry into these matters.”
In a lengthy report on Sept. 10 Hindenburg Research compared Nikola to Theranos, calling it an “intricate fraud” which, among other allegations, overstated the capabilities of its earliest test trucks. Nikola has pushed back, accusing the short seller of making misleading statements that were designed to manipulate its shares.
The feud prompted the SEC to examine Hindenburg’s claims to determine whether Nikola may have violated securities laws, said Bloomberg’s anonymous sources.
The regulator’s review is preliminary and may not lead to allegations of wrongdoing; the most likely outcome – of one judges how the SEC has handled Tesla – is something between Herbalife and Wirecard, where the SEC finds one or more violations but nothing terminal, slaps the company with a fine, and everyone moves on sparking a furious short squeeze.
Furthermore, with GM involved and Mary Barra vouching for its due diligence in Nikola, it is unlikely that the SEC will dare to destroy the company and ruin hundreds of thousands of Robinhood traders who have been busy buying the dip in the alleged fraud.
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