Why Yahoo Finance Rated Nikola as the Worst Company of 2020
By: Dylan Hughes
Tags: Transportation, Electric Vehicles, Business, Investing, Sustainability

Why Yahoo Finance Rated Nikola as the Worst Company of 2020

An up-and-down year for Nikola is close to ending, but it's not done taking heat

Photo from Nikola Motor Company

With companies, the government, and consumers showing more and more acceptance of a future of alternative energy, some auto manufacturers have laid out aspirational plans for their vehicles. While Tesla still carries the electric vehicle torch, companies such as GM and Nio have shown major upside for the future.

Nikola caught similar buzz earlier in the year. As of late, however, the stock market and seemingly everyone else is throwing in the towel on the hopeful electric-hydrogen hybrid vehicle producer.

After a $34 IPO in early June, Nikola (ticker: NKLA) quickly jumped to just shy of $80 a share. It didn’t take long for the market to realize Nikola was nowhere near worth that valuation. And even now, at about $18 a share, Nikola may not be worth its current $6.77 billion valuation.

In September, when Nikola announced a partnership with GM, investors ate it up, sending the stock back over $50 after slowly trickling back down to near its initial public offering price. The deal would give GM an 11% stake in Nikola and provide the newly-public company with GM’s batteries, chassis architecture for Nikola’s Badger pickup truck, fuel cell systems, and a factory to build the truck. The deal was valued at about $2 billion.

Just days later, however, Nikola’s short glimpse at consumer infatuation would fade.

Financial research company Hindenburg Research published a report claiming fraud on the part of Nikola, saying that the company’s demonstration of its hydrogen-electric vehicles was not accurate. The report claimed that the trucks were not operating under their own power and were driving down an incline.

Hindenburg also alleged that Trevor Milton, the company’s founder and majority stockholder, misled companies such as GM by falsely claiming to own extensive proprietary technology. Milton called the claims “false and defamatory” but resigned as CEO weeks later.

While GM stood by its investment early on, it recently announced a more limited partnership with Nikola. The auto giant will still supply Nikola with its hydrogen fuel cells, but will no longer take an 11% stake or produce the Badger pickup truck.

All of this led Yahoo Finance’s users to vote Nikola as the worst company of 2020 in a poll it conducted. The poll received 1,582 responses, with 15% of the vote going to Nikola — more than five times as much as the second-place company.

From Yahoo Finance:

Yahoo Finance users are disappointed, angry, and poorer Many respondents were furious with the company for losing their money. In 220 angry and disappointed responses, the word “fraud” appeared 74 times and “scam” 36 times. Nikola has strongly denied allegations of fraud. According to Bloomberg, the SEC is investigating Hindenburg’s claims about Nikola, and the Financial Times reported that the Justice Department has also launched a probe and then later subpoenaed Milton, which the company acknowledged in November.

Just 20% of Nikola voters believed the company could redeem itself, noting its lack of transparency and lack of delivery on its promise as the main concerns going forward.

If Nikola hopes to regain the trust of investors, it will have to do a better job with proof of concept. Right now, the company doesn’t seem to be anywhere close to actually producing vehicles — putting it at least a year behind companies jumping into the game now, and even further behind Tesla, Nio, and others.

The hydrogen-electric fuel cell that would power the cool-looking Badger pickup and semi-trucks would find a large market if Nikola’s plans for infrastructure development pan out and someone else doesn’t beat them to the punch.

For now, though, Nikola is nothing but a company with cool concepts, an over-inflated valuation, and little trust from Wall Street.