9 object analysts did not notice awareness in Nikola’s Annual Report

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Manufacturer of electric and hydrogen-fueled power trucks

Nikola

2020 was difficult, which included short sellers, leaving regulation, and eliminating buyers.

The company’s annual filing, published Thursday afternoon, reviewed some of the key events. It also revealed new information that Wall Street analysts did not ask about the company’s employment conference call.

Nikola (ticker: NKLA) and investors enjoyed the highest and lowest levels in 2020. Shares hit nearly $ 94, giving the company a market value of more than $ 40 billion, or about the only market cap of a hundred-year-old auto maker.

Motor Motor

(F).

Shares settled down but traded north of $ 50 after a proposed contract

General motors

(GM) for engineering and manufacturing support as well as parts supply.

Then came a negative research report from short seller Hindenburg Research alleging that the regulators were misleading investors. Following the report, an analyst handed down shares to Sell and founder Trevor Milton left the company. Nikola’s stock fell to about $ 10, making the company worth about $ 4.5 billion.

Nikola denied the claims but conducted an internal investigation, run by Kirkland & Ellis, looking into the Hindenburg report. The company’s 10k annual filing updated investors on the status of that study, saying its findings were “inconsistent with the main conclusion of Hindenburg’s article that the fraud was a complex or serious fraud. Company. The investigation found that nine statements made by Milton were “wholly or partly erroneous”:

1. In July 2016, the Company stated that it owned the rights to natural gas sources, and in August 2016 the wells were used as backup for solar hydrogen production;

2. In August 2016, Milton and Company reported that the Company had invented zero-emission engines;

3. In December 2016, Milton said the Nikola One was a fully functional vehicle;

4. That a video in October 2017 released by the Company gave the impression that the Nikola One was led;

5. In April 2019, Milton reported that solar panels on the roof of the Company’s headquarters emit about 18 megawatts of energy per day;

6. In December 2019 and July 2020, Milton stated that the Company could “produce over 1,000 kg of hydrogen at the Company’s demo stations and that the Company was“ down below ”$ 3 / kg at that time ;

7. In July 2020, Milton stated that “all key components are made in-house”; made similar statements in June 2020;

8. In July 2020, Milton said the inverter software was the most advanced in the world and other OEMs had asked to use it; and

9. In July 2020, Milton reported that five trucks were “coming off the assembly line” in Ulm, Germany.

Nikola declined to comment on the revelations, explaining that she is not commenting on an ongoing lawsuit. Nikola is facing a lawsuit and regulatory investigations related to the short seller’s report.

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Hydrogen costs are huge for Nikola and the hydrogen industry as a whole. A kilogram of hydrogen can, in large part, be thought of as a gallon of diesel fuel. Costs of less than $ 4 per kilogram for truck drivers are seen as a key step in the wider adoption of hydrogen technology, replacing diesel engines. Today, retail prices of hydrogen in California can exceed $ 16 per kilogram. Nikola believes that by using low cost electricity and generating hydrogen at its filling stations from water, they can significantly reduce costs.

Wall Street was not interested in the announcements on the company’s employment conference call held Thursday afternoon. Hindenburg came up just once when the Nikola ruling reviewed unforeseen costs.

Analysts may not have raised questions because they know the company won’t have much to add. Most of the analysts ’notes released after employment focused on the company’s 2021 milestones, which include the delivery of the first vehicles for commercial service. . That doesn’t mean Wall Street doesn’t pay attention. “This lawsuit is still over the top of the story and a topic that the management team needs to investigate looking forward,” said Wedbush analyst Dan Ives. Barron’s. Ives ranks Nikola Hold shares and has a $ 25 price target for the stock.

The stock, at around $ 18, is about 60% lower than levels around the time of the GM news. Investors seem to be getting a discount on the costs and risks associated with a lawsuit.

However, Nikola shares are up about 19% year to date, outperforming the comparable yields of the S&P 500 and the Dow Jones industrial average.

Write to Al Root at [email protected]