How Nikola's Response to Short Seller Report Falls Short

Cars and Drivers

Published: September 11, 2020 11:34 am

Shares of Nikola Corp. (NASDAQ: NKLA) dropped more than 11% on Thursday following the release of a short seller report that scorched the maker of electric and hybrid electric-fuel cell heavy-duty trucks. Shares have dropped another 15% early Friday after the company released a statement denying and decrying the short seller’s screed.

Nikola accuses short seller Hindenburg Research of trying to “manipulate the market and profit from a manufactured decline in our stock price.” Calling the report a “hit job for short sale profit driven by greed,” Nikola said it has retained the law firm of Kirkland & Ellis to look at possible legal recourse.

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Investors’ response to the note probably fell far short of Nikola’s expectations. Shortly after the report was published, founder and CEO Trevor Milton tweeted that a detailed response would be forthcoming.

https://twitter.com/nikolatrevor/status/1304081904677904390

While hiring a law firm to consider legal options is certainly called for, it is not a detailed response.

Not that investors should have expected one, regardless of Milton’s bravado. Companies that have been savaged by short seller reports don’t normally respond directly to such reports, and Nikola is no exception.

In its statement, Nikola said that the company intends to take its evidence and documentation to the U.S. Securities and Exchange Commission (SEC) for review. The company said it would “be back at you after we have advanced the process with the SEC.”

But that’s boring and will take weeks to play out. Just as investors went along for the ride higher on Nikola stock following its initial public offering in June, they appear to be just as willing to follow the crowd dragging Nikola’s shares down.

Nikola stock gained more than 40% earlier this week following an announced deal between the company and General Motors. So far, the shares have given back nearly two-thirds of that gain.

Shares traded down about 16% at $31.56 Friday morning, in a post-IPO range of $10.27 to $93.99.

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