Is Nikola $NKLA a Fraud?

In an era where Fed liquidity has created a Big Tech bubble and speculative stocks like Tesla are going through the roof, is Nikola Corp a valid business to invest in?

Here we have a founder with a history of failure as an entrepreneur. Why would this time be any different? A hydrogen truck company stocked with manufacturing folk pretending it’s a technology company? Give me a break in 2020.

He started his first company, an alarm and surveillance company, in 2003 and sold it a few years later. He then launched a retail company that failed before eventually launching Nikola. A SPAC with zero revenue is hardly reassuring.

Nikola Corp. Executive Chairman Trevor Milton attempted to curb expectations and restore confidence in August 2020 but investors are already becoming skeptical of the EV/Hydrogen SPAC gold rush of the times.

Newly Minted Billionaire Without Revenue or a Product Yet

From losing his mother to cancer early in his life to failing two consecutive times to keep doors open at his previous startups — and losing his house, car, and other personal assets in the process — nobody could reasonably expect that Milton is the next Elon Musk. It just doesn’t add up. Not to mention the bet on Hydrogen is weirdly offside, considering that the EV sector appears to be picking up with amazing competition.

That competition doesn’t guarantee Tesla will be 2 years ahead in the technology forever. Things can change very quickly in the EV space in the next decade, as new automobile companies disrupt the old.

Trevor Milton lives in a bubble of his own making. As a newly minted Billionaire, he might be a sign of the times. But his history of failure is a very stark warning. History is the greatest predictor of future behavior. In most cases in the world, psychology does impact business. You cannot make things up, or risk being found out as a con artist of the business world.

To say that Nikola $NKLA’s stock price has been volatile would be an understatement. Milton has now reconfirmed several of the company’s plans. These include production of its hydrogen fuel cell semi truck for next year and a manufacturing partnership with an automaker for its Badger pickup truck.

Tesla Hype has Warped the (FOMO) Fear of Missing Out Movement

To invest in Nikola Corp above $20 seems somewhat of a chasing FOMO move. And if you did, I’m not sure it could be said you did your due diligence. The bull market in Tesla is real and it’s spectacular. The bull market in the rest of the electric vehicle plays feels way less substantial. Hydrogen is even more of a long shot. So it’s a real head scratcher how Robinhood investors are warping the day trading cycle.

We have to consider the simplest answer, Occam’s razor and all, that Nikola Corp is indeed a fraudulent endeavor. To be on a failed entrepreneur who is trying to clone Elon Musk would be foolhardy, right? I thought cloning is what Chinese companies used to do. But when American innovation is doing it, you know there’s something wrong with innovation in America.

Milton has a history of running companies whose capital runs out and the company fails. That’s the worst possible news for $NKLA investors: the attempt to scale in an increasing EV world, at the other end of the spectrum of hybrid hydrogen vehicles.

Milton’s timing for Nikola Motor Company was great. But timing alone doesn’t mean you can build a company to scale in one of the most competitive sectors in the world. How does a pre-revenue company sell its shares above $70? Is that even ethical?

SPACs are Fueling On-Demand Corporate Fraud at Scale

Nikola, which went public in early June, is still conducting research and development and hasn’t generated revenue yet. What can you say about the ethics of “instant” or on-demand Billionaires? The volatility in the stock market is like seeing rose-colored glasses over the actual economy and pandemic at the heart of America.

Shares of the company, which plans to make battery-electric and hydrogen-powered trucks, have fallen in recent times from $79 to $35. And the downfall correction isn’t done yet. This stock is likely worth around $22 at the best of overly optimistic valuations.

Nikola Motor Company isn’t an early mover. It’s likely a completely impractical business. It does not have a winning technology team, nor a founder with a history of success. Most analysts don’t see how hydrogen can scale to compete with EV any time soon.

When the EV bubble bursts, $NKLA is likely to be one of the worst companies to take a hit that dares to call itself a SPAC. The electric vehicle, or EV, market is an emerging segment of the auto industry, powered by the growing consumer interest in more eco-friendly products. But hydrogen in 2020 is like a foolhardy dream.

The era of special acquisition companies or SPACs, will be much maligned. Here we have the likes of Nikola, Nio, Li Auto, Tortoise Acquisition, Spartan Energy Acquisition and DiamondPeak. How many will be around in ten years? Not likely many of them. Least likely of them all is Nikola Corp.

Promises Don’t Make Perfect Speculative Investments

All of this over-promising is getting really tiresome for investors. According to Trevor Milton, the next four months are going to be the greatest four month’s in Nikola’s history ever.

Elon Musk must be laughing in his automated factories at how this billionaire (clone) runs his Twitter account and how lawsuits are coming for this company. You cannot make this stuff up and SPACs demonstrate the FOMO culture surrounding the influx of Robinhood traders.

How sad is this story for real investors? Nikola’s entire second quarter revenue of $36,000 was for solar panels for Executive Chairman Trevor Milton, according to a filing with the Securities and Exchange Commission. If that doesn’t sound sketchy to you, you might in 2020 be prone to misleading tweets, peer pressure and fake news.

Of course a fad is still a fad, even down another 10% today, $NKLA the company is still valued at $13.28 billion, according to data from FactSet.