By Mike Colias
A Nikola Corp. executive defended the electric-truck firm's
technology and business plan, telling an investor conference that
its partners are staying the course following the departure of its
high-profile founder and executive chairman.
"Nothing has changed," Kim Brady, Nikola's chief financial
officer, said during a virtual conference Tuesday. "We recommend
that investors really focus on the future and what we have
delivered and what we're going to deliver."
Nikola, a Phoenix-based startup with backing from General Motors
Co., Robert Bosch GmbH and others, has come under scrutiny recently
following allegations it misled investors about the progress of its
technology.
The allegations were outlined in a short seller's report
released earlier this month. Nikola has called the report by
Hindenburg Research false.
Nikola founder Trevor Milton stepped down from his role as
executive chairman Sunday, saying he wanted the focus of the
company to be on the business, not him. He was replaced by Stephen
Girsky, a former GM executive and Nikola director, who is
well-known in the auto industry.
The allegations about the startup have raised questions among
investors and analysts about whether Nikola's partner companies did
their due diligence.
GM Chief Executive Mary Barra said the auto maker conducted
"appropriate diligence" when she was asked about the topic on a
recent analyst call.
Mr. Brady on Tuesday said Nikola has been well vetted, and that
Bosch, for example, sent an "army" of engineers to assess the
company and its technology before making its investment.
Bosch said it performs due diligence as part of its investment
strategy but that the details of the process are confidential and
proprietary. Earlier this week, the Gerrman engineering group said
it intends to continue working with Nikola.
Among Hindenburg Research's allegations was that Mr. Milton led
investors to believe that Nikola largely develops its own
technology when in fact it purchases it from outside suppliers.
"We have never represented that we make every component," Mr.
Brady said at the conference Tuesday, hosted by Evercore ISI.
"Think about Apple iPhones," he said. "They don't manufacture a
single part. But they control design and functionality and user
interface."
At the heart of the short seller's report is whether past
statements from Mr. Milton gave investors a false impression of
Nikola's progress. The scrutiny also has raised fundamental
questions about what technology the company has developed on its
own that will end up in its trucks.
Nikola's business model is built around the concept of
semi-trucks powered by batteries and hydrogen-fuel cells. The
company says it plans to partner with energy companies to build
hydrogen fueling stations, while contracting with manufacturers to
help engineer and assemble some of its semi-trucks. It plans to
lease the trucks to freight operators, promising to lower their
operating costs.
Nikola is developing a few prototype trucks, with its first
model expected to go into production by the fourth quarter of next
year. It also struck a deal with GM this month to have the auto
giant engineer and build a zero-emissions pickup truck, a market
that many startups and traditional car companies are targeting,
including GM with its own model.
It is common for car makers to outsource the manufacture of
parts and even larger systems of a vehicle. Much of the key
technology in GM's Chevrolet Bolt electric car, for example, is
supplied by Korean electronics company LG Chem.
The Hindenburg Reseach report took Mr. Milton to task for what
it claims are false statements about Nikola having itself developed
certain key components, including batteries.
Mr. Brady said it is common for auto makers to get their battery
cells from suppliers such as Panasonic Corp. or Samsung Electronics
Co. At Nikola, he said, "we try to control" the design of the
battery pack in which the cells are housed.
"We do our own batteries at Nikola and have since day 1," Mr.
Milton said in a tweet on June 4, the day the company went public.
"We do, however, test with everyone, and if a supplier builds a
better battery, we would use them."
The Wall Street Journal and the Financial Times have reported
that the company plans to use California-based Romeo Systems Inc.
to provide batteries for its first semi-truck.
Nikola went public in June through a reverse merger, part of a
wave of investor enthusiasm in recent months for electric-vehicle
startups. The company's valuation initially soared -- briefly
edging past that of Ford Motor Co. -- -- before falling sharply in
the wake of the short-seller report.
Nikola shares were up about 3% on Tuesday after dropping Monday
in the wake of Mr. Milton's departure.
Mr. Brady also defended against Hindenburg's allegation that
Nikola misled investors by claiming that trucks displayed on stage
at past events, and in a 2018 promotional video, were operational
even though they were unable to propel themselves.
Nikola has said the truck shown in the video had functional
batteries and other parts, but said it wasn't propelled on its own.
The video never stated the prototype was driving under its own
power, the company said, adding that its newer trucks are able to
be driven.
"Anyone who's involved in the automotive world understands when
a truck is first introduced, it's a show truck," Mr. Brady
said.
The Securities and Exchange Commission and the Justice
Department are investigating whether Nikola misled investors by
making exaggerated claims, people familiar with the matter have
said.
"That's what we've heard," Mr. Brady said about the reported
probes. "When we have more to disclose, we'll disclose."
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
September 22, 2020 16:39 ET (20:39 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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