Self-promotion, hyperbole, and an “ocean of lies” … Today’s episode explores what happens when a $20 billion company acts like a penny stock.
Typically, bigger companies are considered more solid and trustworthy. But that may not be true for Nikola Corporation (NASDAQ: NKLA), an electric vehicle company. Turns out, it may have been a house of cards … Learn what happened when it all came crashing down!
In today’s episode, the whole SteadyTrade Podcast crew — Tim Bohen, Kim Ann Curtin, and Stephen Johnson — break down the crazy but true story of one of the stock market’s biggest pumps so far this year.
The Problem With Nikola
Nikola seemed like the real deal. But was it just marketing?
As Stephen muses, it “all starts with the name.”
Nikola Tesla was a Serbian-American inventor. He’s largely viewed as the father of the modern alternating current (AC) electricity system.
He was also a deeply strange dude. Apparently, he lived on warm milk and once fell in love with a pigeon (yep, see the links below).
Tesla Inc. (NASDAQ: TSLA), probably the most famous EV company in the world, is named after the aforementioned inventor.
Nikola Inc. is unrelated to the Tesla corporation, but the name automatically creates an association. This was a pretty clever choice. From the very beginning, Nikola was able to capitalize on Tesla’s reputation — without ever having shipped a product.
Its proposed products looked good, too. In fact, Tim was all hot and bothered about its ‘Badger’ truck. He wanted to order one!
Nikola was in a hot sector, highly promoted, and getting press. It seemed like it had a lot going for it…
But things aren’t always what they seem.
As Tim puts it, this is the ultimate lesson on why traders need to be skeptical, do research, and avoid bag holding.
The Fall From Grace
A $2 billion deal with General Motors Company (NYSE: GM) might seem like an amazing thing.
But for Nikola, things started to unravel shortly after the announcement.
Within days, the Hindenburg Report released a scathing exposé: “How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America.”
Nathan Anderson penned the article. Anderson started publishing skeptical articles in the 2010s — and landed in hot water for getting a little too close to the truth.
The SteadyTrade crew discusses how this downfall echoes the story of Theranos, a much-hyped medical company that turned out to be a massive scam.
Learn how it all unfolded. Anderson’s article may have sunk Nikola, but ultimately, the EV company is drowning in its own ocean of lies.
The Emperor Has No Clothes
How do companies and people get away with this kind of high-level fraud for so long?
How did Bernie Madoff do it? What about Elizabeth Holmes? And how did Nikola pull it off?
According to Kim, “it’s not just greed.” Sure, greed can play a part — but it’s more about FOMO and the fear of looking stupid.
Learn about how these “inner gremlins” can add up to a massive snowball effect.
Lessons From Nikola
In the episode, the crew explores what traders can learn from the Nikola debacle.
For one? Don’t be a bag holder. Right now, General Motors could be the biggest bag holder of all. Will the company admit defeat or try to defend its decision?
Another lesson? You’ve gotta be willing to let go. Learn from Tim. Even though Tim loved the idea of Nikola’s truck, Kim commends him on being “willing to pivot” once he realized what was going on with the company.
Nikola’s ride may be nearing an end, but every trader can take away some great lessons from this event.
- “Bad Blood: Secrets and Lies in a Silicon Valley Startup” by John Carreyrou
- “The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public” by Lynn Stout
Articles & More
- “Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America” — Hindenburg Research
- “Did Edison Really Electrocute Topsy the Elephant?” — Rutgers
- “The Fascinating Life of Nikola Tesla, the Man Who Electrified Our World and Fell in Love With a Pigeon” — Business Insider
- For some of the hottest financial news, follow Hindenburg Research on Twitter: @HindenburgRes
(As an Amazon Associate, we earn from qualifying purchases.)
Wanna Weigh In?
Got something to say about Nikola, sketchy companies, or the market in general?
Leave a comment — or ask us anything!
Remember: if we select your question or comment as an on-air topic, you could win a SteadyTrade mystery gift box. Leave a comment below or on YouTube!
Thanks for tuning in to the SteadyTrade podcast. Stay tuned for weekly episodes featuring the hottest topics for aspiring traders.
Into this episode? Please leave a review on iTunes.
Meet Our Hosts
Follow our hosts on social media…
Kim Ann Curtin