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Initial Disclosure: After extensive research, we have taken a short position in shares of Nikola Corp. This report represents our opinion, and we encourage every reader to do their own due diligence. Please see our full disclaimer at the bottom of the report. Unlike Nikola, Tesla develops extensive proprietary technology, which cuts many traditional automakers and suppliers out of its picture.
On the morning of September 8, , Nikola announced a strategic manufacturing partnership with General Motors, sending shares of both companies sharply higher. For many, the deal was viewed as long-awaited validation for Nikola, which to date has mainly presented little but prototypes, renderings and a heap of promises. After all, General Motors is one of the largest, multinational auto manufacturers on the planet and has been in business for over years. It has reach into every major auto market, including the U.
GM can begin selling shares before a single truck rolls off the line. But why sign with Nikola at all? Tech founders are often accused of being overly rosy with their projections. Supporters credit such founders as having bold, forward-thinking plans while detractors accuse them of knowingly selling unrealistic promises. While such debates among optimists and pessimists are common, most everyone can agree that there is a difference between being overly optimistic about the future and outright lying.
Credibility is important for any management team, but this is especially true of a company like Nikola that has virtually no revenue and no shippable product.
Aug 5 th CNBC, What we found is that, for over a decade, instead of developing his own capabilities, Trevor has established an undeniable track record of taking from others and claiming technology as his own. He has quietly used off-the-shelf products from third-parties while loudly claiming to have vast proprietary technology. Trevor would then leverage what he had and repeatedly mislead customers, partners, and investors in order to build his credibility and take his concept to the next level.
This pattern of behavior continues to this day, now with billions of dollars on the line and with Nikola tied to some of the largest auto companies in the world. After dropping out of college , Trevor Milton started an alarm sales company in Utah called St. George Security and Alarm. Our interview with its buyer indicated that Trevor overpromised, resulting in a total loss for the initial acquirer.
Following the alarm business exit, Trevor launched an online classified ads website that sold used cars, called uPillar. For more on both of these early businesses, see the Appendix at the end of this report. Trevor joined forces with an engineer named Mike Shrout who had developed compressed natural gas CNG conversion technology for diesel engines.
Shrout was to bring the technical expertise to the venture while Trevor would bring his business experience. The agreement , which we located through litigation records, called for the conversion of an initial 10 trucks for testing with a commitment to convert trucks thereafter. The deal immediately hit roadblocks, as dHybrid failed to deliver on its agreement.
Swift filed a lawsuit in mid In the email, Trevor makes several claims that appear to be outright fabrications, based on litigation records and conversations with a former business partner:. The parties entered into negotiations and signed a term sheet in May , but only one month later in June, sPower exercised the termination clause and backed out of the agreement citing significant misrepresentations during their due diligence process.
In the Spring of , with dHybrid under pressure to raise additional capital, Trevor prepared a presentation for the Park City Angels , a venture capital group in Salt Lake City. In that presentation, Trevor falsely claimed that the company had an experienced Chief Technology Officer. He had only worked on various proof-of-concept projects for dHybrid as an outside consultant. With the similar name of dHybrid Systems, Trevor was able to suggest to prospective clients, partners and investors that the new company was a continuation of dHybrid and its years of experience and achievements.
We reviewed an example of such marketing materials that falsely suggested dHybrid Systems began in , when in fact the entity had been formed in October Here are the incorporation records for comparison:.
In recent interviews, Trevor has overstated the exit value. In a interview with Trucks. Getting back to the deal at the time, it appears Trevor overpromised on the capabilities of the technology and its effectiveness in the field. Per the conversation [ click for audio ]:. The company in question was Waste Pro. Here is a picture of one of its trucks converted for CNG from dHybrid.
According to former employees of EVDrive, they signed with Trevor based not only on his supposed leadership role at Worthington but also on a belief that Nikola named Bluegentech at the time had advanced proprietary turbine technology that would make for a good fit with their own technology.
But that appears to have been false as well. Once again, we have the email record to prove this. The turbine purchases were stated to be on behalf of Worthington, which Trevor was working with at the time:. As we detail in the Appendix to this report, Worthington had a deep relationship with Nikola, which it now appears to be attempting to downplay and distance itself from. At one point, Nikola was a subsidiary of Worthington and the close relationship gave Trevor enough credibility to cobble together several early partnerships.
The press release vowed to unveil the Nikola One in December, committing the company to an aggressive deadline. By the end of the year, Nikola was poised to reveal its revolutionary new truck, the Nikola One. Really incredible. We will have a chain on the seats to prevent people from coming in just for the safety. But this thing fully functions and works, which is really incredible. Trevor then closed the presentation by insisting 3 times that the truck was real, at the mark:.
How can that be possible? This is not a pusher. Thank you so much everyone! Some of the people found out about us over the last 4 or 5 months as we announced in the lead-up to this big event, but it took years and years to get here. This is a fully functional vehicle which is really incredible. You can go through. We can change out whatever they want, all the temperatures.
It was a bold retort. In the video of the event , we saw no such table with truck gears and components clearly visible to all. Instead, the seating went right up to the stage except for a small table with a computer monitor up front:. We have behind-the-scenes photos and other evidence showing just how incomplete the Nikola One was at the time of the reveal. Other components had not yet arrived, including the e-axles, the turbine, the natural gas fueling system, and the body — according to a source who worked on the job.
The factory was not even set up for production. Workers were running to the hardware store to pick up basic parts, according to the source. Amidst all this, the company abandoned its supposedly revolutionary compressed natural gas CNG technology with no explanation.
At the beginning of August, Nikola abruptly announced that it had pivoted from a CNG turbine range extender to a hydrogen fuel cell range extender. The press release boasted that this achievement was the holy grail of trucking :. We are not aware of any zero emission truck in the world that can haul 80, pounds more than 1, miles and do it without stopping. The Nikola One requires only 15 minutes of downtime before heading out for the next 1, miles.
Despite these claims, there was no in-house hydrogen capabilities and no hydrogen partners were brought on board , according to former partners working in the lead-up to the show. The announcement was a shock to even those involved with the company , according to our sources. Less than two weeks prior to the announcement that Nikola had engineered a revolutionary hydrogen solution, the Nikola Twitter account reinforced that its focus was still on CNG compressed natural gas , not hydrogen.
Months earlier Trevor had boasted in public interviews of its natural gas capabilities, stating :. It is unclear why Nikola decided to suddenly abandon its supposed year advantage in natural gas. The truck presented at the show had natural gas turbines installed, according to our sources.
As it turns out, building a zero-emission hydrogen truck is rather difficult. Trevor had H2 stenciled on the side of the Nikola One despite the reality that the Nikola One contained a turbine designed for natural gas and absolutely zero hydrogen technology whatsoever , according to our sources. A video of the event showing the stencil-work can be seen here :. By November, one month before the show, a team from Brayton arrived with natural gas turbines, according to sources involved in the preparation.
The fueling system was natural gas only. As the show got closer, ambitions were reduced, and it was clear that everyone wanted to just make things look as good as possible for the presentation. Most everything needed to be installed before the body arrived, so things were put in and buttoned up as well as they could be.
The body arrived in late November, and the team from N2A Motors , which makes custom car bodies, got it installed on Thanksgiving. This was roughly a week before the show and just days before the truck needed to be pulled onto the stage, which was being built on the other side of the factory. According to a source who worked on the project, and as is visible in this photograph, a cable was snaked up from under the stage through the floor of the cab to power the cabin screens.
In an attempt to underscore the functionality of the truck, Trevor put the focus on the only part of it that was turned on— the screens that were powered by the cable under the stage. But the screens, which had been loaded the day before with largely static webpages, according to our source, were reluctant to respond to his efforts.
They were not exaggerations. They were simply bald-faced lies. In January , following the event, the company raised capital as part of its Series A round. F ] It also signed partnerships in the months to come with companies like major automotive supplier Bosch as well as fuel cell and hydrogen partners.
Presumably, the misleading representations made at the event helped fuel these new deals. Subsequently, CNH International jumped in with both an investment and agreement to aid in the manufacturing.
To the surprise of people involved in the Nikola One project, development work on the truck did not continue after the show.
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