"The Fall of Nikola, the 'Second Tesla'... Stock Drops 19.3% Following Founder’s Resignation Announcement"

Stock Plunge Extends from Nikola to GM
Collapse After Doubts Raised Over Technology
Domestic Investors Also Face Losses of About 34 Billion Won

[Asia Economy Reporter Naju-seok] The stock price of Nikola, a U.S. hydrogen electric vehicle company once hailed as the "second Tesla," plummeted following the resignation of its founder.

On the 21st (local time) at the New York Stock Exchange, Nikola closed at $27.58, down 19.3% from the previous day. General Motors (GM), the automaker that acquired a stake in Nikola and took charge of producing hydrogen electric trucks, also saw its stock price fall by 4.8%. The stock price crashed after Trevor Milton (pictured), the founder and chairman, abruptly announced his resignation amid fraud allegations. Milton stepped down not only as Nikola chairman but also as the board chairman.

Nikola founder and former CEO Trevor Milton [Image source=Reuters Yonhap News]

The plunge in Nikola's stock caused domestic investors to suffer losses amounting to approximately 33.8 billion KRW in just one day. According to the Securities Information Portal of the Korea Securities Depository on the 22nd, the scale of domestic investors' holdings was estimated at $150.66 million (about 175.3 billion KRW). As the stock price plummeted overnight, the value of domestic investors' shares also declined. Moreover, Hanwha Solutions, which invested in Nikola's shares, experienced a 7.4% plunge the previous day and continued to show a decline in the 1% range on this day.

On the 10th, Hindenburg, a financial analysis and short-selling firm, released a report questioning Nikola's technological capabilities. Following this, news emerged that the U.S. Securities and Exchange Commission (SEC) and the Department of Justice had launched investigations related to the matter, intensifying the controversy. According to Hindenburg, Nikola does not possess hydrogen electric vehicle technology but has been forming partnerships with major automakers. Hindenburg also pointed out that a video showing Nikola's vehicle in motion was actually filmed by pushing the vehicle uphill and rolling it down. The video was produced with the intent to make it appear as if a functioning prototype had been developed. Nikola partially accepted Hindenburg's claims, stating that the video was a promotional video and that the vehicle shown did not have its own power source. However, they argued, "Nikola never claimed that the vehicle in the video was driving under its own power." Hindenburg stated that they had secured phone calls, text messages, emails, and photos related to this issue. The sudden resignation of Milton gave more weight to Hindenburg's allegations.

According to The New York Times (NYT), Hindenburg's expos? was released just two days after Nikola and GM agreed to produce a hydrogen fuel cell electric pickup truck powered by batteries. At that time, GM acquired an 11% stake in Nikola and announced plans to produce the hydrogen fuel cell electric pickup truck by the end of 2022. Nikola's stock price had been on the rise due to the deal with GM, reaching $50.05 as recently as the 8th. However, after Hindenburg's revelations, the price dropped to about half. Despite various suspicions, GM expressed its intention to maintain its relationship with Nikola. In a statement, GM said, "We will cooperate with Nikola regarding this deal."

NYT cited experts who said that established automakers like GM have no choice but to partner with startups to catch up with Tesla, which has already taken the lead in electric vehicle sales, but Nikola demonstrates the risks of this approach.

Nikola will now be operated under the leadership of new board chairman Steven Girsky (former GM vice chairman) and CEO Mark Russell.