When everything looks like a nail, you have a tendency to be called a hammer… but Nikola sure looks like a nail to me! If you want to understand the absurdity of what’s going on in the market, look no further than this company.
The company itself has a vision (which is important when you have no revenue): “Our vision is to be the zero-emissions transportation industry leader. We plan to realize this vision through world-class partnerships, groundbreaking research and development, and a revolutionary business model.” Does it get more exciting than that?? Yes. It does.
Having peaked at a $25 billion market cap in June of last year, it now sits comfortably at $6.6 billion which makes it slightly bigger than Cimarex, who had $1.781 billion in revenue in 2020. Yesterday, Nikola announced in line revenue of…. $95,000. Yep. Not a typo, and they are actually solar revenues with a cost of revenue of $72,000 (but don’t worry, they discontinued that business in 2020). So their gross profit was $23,000 from a discontinued business against operating expenses of $382,735,000.
And the best part of their 10-K filing? The Southern District of New York (SDNY) is investigating the company for, as described in the 10-K:
“Mr. Milton or the Company made a number of statements, which it asserted were inaccurate, including but not limited to the following:
1.in July 2016, the Company stated that it owned rights to natural gas wells, and in August 2016 that the wells were used as a backup to solar hydrogen production;
2.in August 2016, Milton and the Company stated that the Company had engineered a zero emissions truck;
3.in December 2016, Milton stated that the Nikola One was a fully functioning vehicle;
4.that an October 2017 video released by the Company gave the impression the Nikola One was driven;
5.in April 2019, Milton stated that solar panels on the roof of the Company’s headquarters produce approximately 18 megawatts of energy per day;
6.in December 2019 and July 2020, Milton stated that the Company “can produce” over 1,000 kg of hydrogen at the Company’s demo stations and that the Company was “down below” $3/kg at that time;
7.in July 2020, Milton stated that “all major components are done in house”; he made similar statements in June 2020;
8.in July 2020, Milton stated that the inverter software was the most advanced in the world and that other OEMs had asked to use it; and
9.in July 2020, Milton stated that five trucks were “coming off the assembly line” in Ulm, Germany.”
The company’s response? “The statements listed above were inaccurate in whole or in part, when made.”
I know I’m a market cynic. I know that I have a real problem with giving multi billion dollar valuations to businesses that aren’t profitable (like
Airbnb), but this is what happens when the Federal Reserve pumps effectively unlimited liquidity into a market, and when government regulations and actions on the need to address climate change gives companies with nothing more than a vision a platform to exist in a public market. I remember a time when a similar thing was happening: February 2000 when
pets.com when public.
