The General Motors-Nikola deal worth $2 billion has attracted allegations of fraud by short-selling firm Hindenburg Research, but GM CEO Mary Barra said that all appropriate diligence was conducted before the deal.
Nikola is also in the news for a staged video of semi-truck rolling down a hill. Nikola has disputed the claims of fraud.
“The company has worked with a lot of different partners and we’re a very capable team that has done the appropriate diligence,” Barra said during a conference Monday with RBC Capital Markets.
GM spokesman Jim Cain emphasized that the diligence was a “thorough review of business, legal and technical matters.”
The Hindenburg report – called “Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America” – uses the Nikola-GM deal as an endpoint but the claims do not directly involve GM.
The Securities and Exchange Commission is reportedly looking into claims of Nikola being involved in some "intricate fraud". The company said that on September 11, Nikola’s legal counsel “proactively contacted and briefed” the SEC regarding its “concerns pertaining to the Hindenburg report.”
The report accuses Nikola of making false claims about its innovations over the years, specifically surrounding its first hydrogen-electric semi-truck prototype, the Nikola One, and nepotism.
As part of the deal, GM picked up an 11% ownership in the company.
In exchange for $2 billion in newly issued common stock, Nikola will get in-kind services and access to General Motors' global safety-tested and validated parts and components. Nikola also will pay up to $700 million to GM for production costs.
Barra said,”This strategic partnership with Nikola, an industry leading disrupter, continues the broader deployment of General Motors' all-new Ultium battery and Hydrotec fuel cell systems. We are growing our presence in multiple high-volume EV segments while building scale to lower battery and fuel cell costs and increase profitability. In addition, applying General Motors' electrified technology solutions to the heavy-duty class of commercial vehicles is another important step in fulfilling our vision of a zero-emissions future."
She added, “We will still compete fiercely as it relates to go-to-market with our strong brands like we do today,” Barra said. “This is just a more efficient way to do it. It gets us scale faster, so it’s good for the customer but also is good for the General Motors shareholder cause our technology is being used more broadly.”
Nikola CFO Kim Brady said it was not only a manufacturing contract but quicker access to the market and a long-term, cost-effective way of getting the vehicle to the market
“We have to look at GM-Nikola partnership really in totality in terms of overall opportunity that we have by entering into that relationship,” he said. “We know it’s a win-win because GM is able to identify potential savings on their end and we are also able to identify potential savings on our end.”
News of the allegations drove Nikola shares down but they recovered by the close to end the day up 11.4% at $35.79. GM shares, which have a market value of $44.6 billion, have lost nearly 15% since the start of the year. Nikola’s market value has risen to nearly $13 billion.
“I think it’s offensive to our strategic partners that you have a short seller who’s doing a hack job and essentially pointing fingers at our strategic partners that they don’t know what they’re doing,” Brady said. “I would suggest it’s ridiculous to think they haven’t done a deep dive.”