If you have been following the news on Nikola allegedly misleading its investors, the latest update is that the DOJ has joined the SEC in the said investigation.
General Motors partnered up with Nikola even after news surfaced that the company misled its investors on the subject of its technology. Nikola shares began dropping significantly 7 percent on Tuesday after news that the Department of Justice joined U.S Securities in investigating the company’s alleged fraudulent activities.
As per anonymous sources cited by The Wall Street Journal, the Manhattan U.S attorney branch has been communicating with the Securities and Exchange Commission in the Nikola investigation. Federal authorities are determining whether the company intentionally misrepresented its technology to mislead its investors. The fraud accusations were made by Hindenburg Research, a small research agency.
A representative of the SEC refused to remark in the news. Similarly, the Manhattan attorney’s office and Nikola did not comment.
Nikola Shares Drop After DOJ Joins Investigations
After the fraud allegations came up, a Phoenix-based agency lost 40 percent of its stock that was earned after announcing the General Motors alliance. Trevor Milton, the CEO of Nikola had refuted the allegations made by Hindenburg.
Although General Motors is not a part of the fraud claims, it still has a contract to fulfill. As per the alliance, GM is supposed to provide electric batteries, hydrogen fuel-cells, and manufacturing assistance to Nikola. Mary Barra, General Motors CEO, stated on Monday that the company is doing proper diligence.
Previously, Nikola said that they welcomed the SEC’s involvement and even briefed them on the case. However, the involvement of the DOJ has stirred fresh tensions for Nikola. If the DOJ finds any wrongdoings, they might file a federal criminal charge.
Nikola has hired representatives from several crisis-management and public relations agencies.
Hindenburg Calls Nikola Response “Inadequate”
Last Week, Hindenburg Research released an expose in Nikola saying that a video released of an electric truck was fake and that the truck was not driving itself. It also alleged that the founder of Nikola and the CEL lied on multiple occasions to misrepresent the company. Nikola CEO, in response, denied all the fraud claims. However, the company acknowledged that the truck was not driving itself.
It is important to note that Hindenburg stands to benefit if Nikola shares drop as it owns a short position over the company.
In their allegation report, Hindenburg brought up a former employee who claimed that the 2018 video was shot with the truck rolling down a hill, but the intention of the video was to show the truck’s technological progress.
On Monday, Nikola states that they never publicly claimed that the truck was driving itself but that it was simply “in motion.” They further added that the updated model will be able to drive itself.
Hindenburg responded to Nikola’s explanations and said that it was inadequate.