The Nikola Motors Scandal: No, EV Maker With History of Alleged Fraud Isn’t Dead… Yet

Nikola, the controversial EV maker whose former CEO Trevor Milton was found guilty of fraud, had a dismal Q1 in 2023. Nevertheless, the company said the quarter was “very solid,” showcasing its poor outlook.

Key Highlights of the Nikola Motors Scandal

• Revenue Increase with Underlying Losses: Despite Nikola Motors reporting an increased revenue of $11.1 million in Q1 2023, up from $1.9 million in Q1 2022, the company faced a significant gross loss of almost $33 million, a drastic downturn from a gross profit of $431,000 in the same period last year.
• Production and Sales Downturn: The company’s production and sales figures have been disappointing, with only 33 retail sales of its Tre electric semi-trucks and 31 additional units shipped to dealers in the first quarter.
• Temporary Production Halt: Nikola announced plans to temporarily halt truck production, ostensibly to prepare for the upcoming production of hydrogen-powered trucks. However, the decision comes amidst poor sales and production figures, raising concerns about the company’s operational strategy.
• Controversial Background: The company’s troubles are not new and can be traced back to its public listing via a SPAC merger in June 2020. Nikola quickly reached a market capitalization of about $21.5 billion, surpassing Ford Motors, amid claims of possessing revolutionary battery and hydrogen-fuel cell technology.
• Fraud Allegations and Conviction: The decline in Nikola’s fortunes accelerated following a report by Hindenburg Research, which accused the company of being “an intricate fraud.” The allegations included misrepresentations of its technology and progress, notably a claim that a non-functional truck was presented as operational. These issues culminated in the conviction of former CEO Trevor Milton on charges of wire fraud and securities fraud.
• Stock Price Decline: Following these controversies and compounded by the latest earnings report, Nikola’s stock price experienced a further 15% decline, highlighting the severe impact of the scandal and ongoing challenges facing the company.

Revenue of Nikola Motors is Declining

In terms of revenue, Nikola actually had a better Q1 this year than last. It posted $11.1 million in revenue compared to last year’s Q1 revenue of $1.9 million. That’s about where the positives of the company’s earnings report ends.

When looking only at revenue, one might assume that this year started off better than 2022 for Nikola. This is far from the truth. Despite the large increase in revenue, Nikola reported a gross loss of almost $33 million compared to a gross profit of $431,000 in Q1 2022.

The automaker’s production numbers aren’t much better. It delivered 33 retail sales of its Tre electric semi trucks in Q1 and shipped another 31 to dealers.

Nikola also stressed that 12 different customers ordered 140 of its hydrogen-powered semi trucks. Production for these trucks is slated to begin sometime in July

The company plans on halting production of its trucks this month, but didn’t give a full explanation as to why. It may be because of the poor sales and production figures but the company brass said it was at least partially to prepare for production of the upcoming hydrogen-powered trucks.

The Company’s Road to Failure Started Way Earlier

Nikola’s downspiral didn’t start with Trevor Milton’s 2022 fraud conviction.

In fact, it has been in near free-fall since June 2020, about 5 days after it went public through a SPAC merger. The merger went through during the SPAC craze of 2020 and traders bought it up ferociously in the few days following,

Within 5 days the stock rose to an absurd market capitalization of about $21.5 Billion, flipping Ford Motors. At that moment it seemed that Nikola had a great future ahead of it. It claimed that it had special battery and hydrogen-fuel cell tech (which it seems it never actually had) and launched at the perfect time.

Nikola’s down spiral accelerated when Hindenburg Research, a prolific short seller, dropped a report calling the company “an intricate fraud.” It claimed that the company had heavily misrepresented its tech and progress.

One of the claims in the report detailed how they believed Milton had fraudulently presented a non-functional truck as functional by towing it up a hill and letting it roll down. More than 2 years later, Milton was convicted on 2 counts of wire fraud and one count of securities fraud.

Nikola’s stock price has shown no signs of recovery since the scandal and its earnings report yesterday brought it down another 15%.

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