Nikola ( $NKLA ) J.P. Morgan Price Call Conspiracy

Nikola is a highly speculative SPAC that doesn’t have a product and won’t be profitable likely for 5 to 10 years. By that time it will have a ridiculous level of competition. Its team aren’t vets of the technology industry, but old-school companies and sectors. Its CFO is incentivized just for financial gain, without building a good financial environment for the future of the economy.

What could possibly go wrong? It’s a crazy good IPO market. The IPO class of 2020 is really overachieving. This stock however is very weird. $NKLA’s stock had spiked from $79.73 on June 9th, 2020. A month later, on July 9th, it was $40.32. In comes J.P. Morgan for the rescue? J.P. Morgan turned bullish on the battery-and hydrogen-electric truck maker, citing a more attractive valuation following the recent selloff.

It’s very suspicious. An analyst by the name of Paul Coster raised his rating to overweight, less than a month after initiating Nikola at neutral on June 22. It’s bad enough Milton overpromised when launching the company’s fuel-cell truck 3½ years ago, Nikola won’t be a first mover. It will have very real competition on all sides. In short, it cannot hope to replicate the success of Tesla.

$NKLA Fell Too Much

JPMorgan upgraded shares of the company on Wednesday July 8th, 2020 to overweight after they fell 57% from their record high to below JPMorgan’s $45 price target. This stock is attracting shorts due to its fraudulent claims and outlandish promises for the future, much of which is occurring on Twitter. Where do we go from here?

Coster said that while the shares “could fall some more” as more of the shares of the special purpose acquisition company (SPAC), or blank-check company, that merged with Nikola become freely tradable. The stock is “starting to look attractive for long-term investors” below his target of $45, as a number of potential catalysts come into view. The problem? After he said this, the stock shot up to $54.61. This company won’t even be profitable in 10 years, by 2030. By that time companies like Tesla, Rivian and others will be very good. Chinese companies will also have more of the market by then.

Nikola’s fuel cell-powered electric semi called Badger is highly controversial. Meanwhile its CEO is crying wolf. It’s a circus for the maligned SPAC that’s destined to see its stock likely fall below $20 in 2021. Coster reminded investors that this is a “story stock,” and the company has yet to show that it can execute on its ambitious business plan. With no revenue expected until late 2021 at the earliest, that’s an important caution — but Coster said that he will be “on board” as long as the company executes to plan.

Should SPACs Be Legal?

A SPAC like Nikola is almost criminal for over-hyping its empty company. Potential upcoming catalysts include an announcement of an original equipment manufacturing partner for the Badger truck, an H2 station deployment plan for the U.K. and accelerated implementation plans for the fuel cell truck. Still there’s no real case for hydrogen based trucks being the future over EV trucks. The barriers to profitability are numerous.

Nikola’s story is indeed a compelling one in an era where sentiment and speculation plays are taking to new heights since the FED injected liquidity into the stock market. It’s been rocket fuel for Tesla, but Nikola might not be so lucky in the long term.

Saddest of all, Trever Milton, the Chairman of Nikola Motors, appears to be trying to emulate Elon Musk on Twitter. That’s a bright red flag for the history of startups.

“It’s just very difficult to make hydrogen, store it, and use it in a car. Hydrogen is an energy storage mechanism. It’s not a source,” Musk said in a 2015 interview.

Who are we to doubt Elon Musk in 2020?

Nikola’s CEO also accepted a $4 million PPP loan, but instantly became a multi-billionaire after the shady SPAC IPO took place.

Nikola is attempting to specialize in battery electric and hydrogen trucks and powersports vehicles. It is seeking to provide zero-emissions transportation and infrastructure solutions. It could also be a fool’s errand promise stealing the money of speculative investors who don’t know what they are getting into.

When your stock gets up upgraded because its price has fallen too low, you really have to wonder. We think J.P. Morgan is likely complicit of corruption in this case.

Nikola’s idealized potential product lineup includes battery electric and hydrogen electric class 8 commercial trucks, off-highway vehicles and watercraft. Unfortunately in 2020 it has no product to speak of. Nobody wants to reserve for a Badger and it’s all potentially a great big hoax.

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