The share price of hydrogen and electric truck startup Nikola Corp. declined for two consecutive days following Hindenburg Research's fraud allegation.
Hindenburg Research, which makes money thru short selling, made allegations that Nikola is an "intricate fraud," causing the startup's share price to plummet for the second day in a row. Nikola has denied the allegation and threatened to take legal action.
The company's stock fell by 14.5% on Friday, following a​n 11% decline on Thursday.
Fraud allegations
A report was published by Hindenburg Research alleging Nikola of several misdeeds, including a claim that the company and its founder and executive chairman Trevor Milton presented ​a product as being closer to market than ​it was in reality.
According to Hindenburg, it had corroborated a Bloomberg report from June which claimed that Milton ​"exaggerated​" the capabilities of the initial launch of its hydrogen fuel cell electric semi-truck, the Nikola One.
While Milton claimed that the Nikola One "fully functions" at its 2016 launch, the Bloomberg report indicated that it was not actually drivable as the company claimed. In an interview with Bloomberg, Milton said he "never deceived anyone."
Nikola's response
The report is being disputed by the electric vehicle maker.
In a statement, Nikola said: "Nikola has been vetted by some of the world's most credible companies and investors. We are on a path to success and will not waver based on a report filled wit​h misleading information attempting to manipulate our stock."
Milton also described the report in a tweet as a "hit job by hindenburg" and an attempt at stock manipulation and promised a detailed rebuttal.
On Friday, the manufacturer announced that it has hired a law firm to explore legal action against Hindenburg and that it plans to present the issue to the US Securities and Exchange Commission (SEC).
However, Hindenberg insisted: "We stand by our research 100%. The company answered none of the 53 questions we raised in our report after promising a full rebuttal."
Nikola Corp. subsidiary Nikola Motors, which claims to be developing hydrogen fuel cell- and electric battery-driven semi-trucks, off-road vehicles and pickups, went public earlier this year, resulting to an increase in share price of over 100%.
Hindenburg's short positions on Nikola
Hindenburg, which describes itself as a "forensic financial research" firm, is know for making serious allegations against a number of companies, most of which appear to be smaller firms.
It claims that some of those firms or their executives have subsequently been slapped with fraud charges by the SEC.
In its Nikola report, the firm stated that it has taken short positions on the company's stock, which will allow it to profit when the stock's price goes down.
Short selling critics, such as Tesla CEO Elon Musk, have argued that short positions incentivize market manipulation.
The Hindenburg report was published two days after Nikola's announcement of a $2 billion stock deal with General Motors to build its Badger electric pickup.
Under the terms of the deal, GM said it will receive an 11% equity stake in Nikola in exchange for building electric and hydrogen-powered versions of the Badger using its own engineering.
