Nikola Got What It Asked For And It Could Backfire Horribly

Illustration for article titled Nikola Got What It Asked For And It Could Backfire Horribly

Image: Nikola Corp.

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The SEC is actually investigating that short-seller’s claims about Nikola’s allegedly misleading tech demos now, Carlos Ghosn’s trial in Japan has started without him, and police traffic stops in Minneapolis are down to all-time lows. All of that and more in The Morning Shift for Tuesday, September 15, 2020.


1st Gear: If I Had A Nikola For Every Time An EV Startup Got The Attention Of The SEC…

Now that electric truck startup Nikola has a ton of money invested and a seemingly-real relationship with General Motors as a manufacturing partner, critics are now looking back at how the startup got this far, and one short-seller claims the company worked pretty hard to mislead potential investors.


Last Friday, Nikola Founder and Executive Chairman Trevor Milton claimed he was taking the issue to the U.S. Securities and Exchange Commission (SEC) directly to set the record straight. A new report says the SEC has become very interested in whether Nikola committed crimes, which probably isn’t good.

From Bloomberg:

The tussle has prompted the SEC to examine Hindenburg’s claims to determine whether Nikola may have violated securities laws, said the people who asked not to be named because the inquiry isn’t public. The regulator’s review is preliminary and may not lead to allegations of wrongdoing.

Shares fell as much as 11.7% in postmarket trading Monday, wiping out its earlier gain at the market’s close.

Nikola has encouraged the SEC to get involved. As its stock tumbled last week after the release of the short seller report, the Phoenix-based company said it reached out to the SEC to discuss its issues with the Hindenburg report, and ultimately held a call with agency officials on the morning of Sept. 11. Nikola says Hindenburg is attempting to profit from a “manufactured decline” in its share price.

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Prior to the short’s report, Nikola had been valued higher than Ford Motor Company following the announcement of its GM deal. That’s all gone, at least for now. So far it’s just a preliminary investigation, but maybe everyone involved should stop tweeting about it for awhile.

Nikola gave us the following statement:

On September 11, Nikola’s legal counsel proactively contacted and briefed the U.S. Securities and Exchange Commission (SEC) regarding Nikola’s concerns pertaining to the Hindenburg report. Nikola welcomes the SEC’s involvement in this matter.


2nd Gear: Nissan’s Wrist-Slapping Begins

It was the first day in court for former-Nissan executive Greg Kelly, who is on trial along with the automaker he worked for and his former boss, Carlos Ghosn. Ghosn was not there as he previously fled Japanese house arrest to Lebanon after being accused of financial misconduct and removed from his position.


Greg Kelly’s defense, basically, is that Ghosn was a good guy and a talented executive, and Nissan struggled to find ways to keep him around with legal means of compensation. However, Kelly claims that, at least Kelly, is innocent in all of this. From Automotive News:

The prosecutors cited a 2011 document that states, in writing, that Nissan must compensate Mr. Ghosn more than he was officially being paid, calling it “postponed compensation.”

The finagling of different ways to compensate Ghosn continued up until the arrest of Ghosn and Kelly in November 2018, the prosecutor said. Prosecutors displayed evidence and images of documents that outlined Ghosn’s pay structure on large wall-mounted video screens.

Kelly’s attorney argued that that Nissan money earmarked for Ghosn was not part of a scheme to provide deferred compensation. The defense had previously argued it was a legal draft of a post-retirement contract intended to keep Ghosn as an adviser to the Japanese carmaker and prevent him from bolting to a competitor.

Kelly’s lawyer maintained that the amount of the compensation was never fixed, an agreement never finalized, and nothing was ever paid.

Thus, the defense argued, there was no requirement to disclose any of it in financial reports.


The Japanese legal system has a notoriously high conviction rate, hence Ghosn’s strong desire to get the hell out of town before Nissan tied this particular noose around his neck. The automaker itself has already submitted to the Japanese government’s accusations and will not contest the charges against it in court.

If found guilty of involvement, Kelly could face up to 10 years in a Japanese prison.


3rd Gear: Demonstrations Work

Following the tragic murder of George Floyd by Minneapolis police officers on May 29 and the subsequent global demonstrations against police brutality and systemic racism, the police department has scaled back its operations, Bloomberg reports:

The department has been making an average of 80% fewer traffic stops each week since May 25, the day of Floyd’s death, according to an analysis by Bloomberg CityLab.

In Minneapolis, two other major categories of police stops also dropped after Floyd’s death, though not to the same degree as traffic law enforcement, which typically involve offenses such as moving or equipment violations.

Stops for “suspicious vehicles,” which means pursuit of vehicles thought to be involved in a crime, dropped 24%. “Suspicious person” stops, those outside the vehicle context that involve “someone who does not belong, appears out of place, or whose actions are suspect,” were down 39% since May 25. The brunt of a typical police department’s interactions with the public occur not in response to violent issues but during these kinds of routine stops.


Bloomberg claims it could be a mix of factors leading to the drop, including the Covid-19 pandemic keeping activity low, reports of high volumes of police officers leaving their jobs, or a general pullback effort in reaction to the very public and necessary backlash against the Minneapolis police. No matter what, it’s already clearing a path for unarmed and better-trained officials and services.


4th Gear: Daimler Pays For Dieselgate, Still Denies Liability

Despite handing over $2.2 billion in penalties for the Dieselgate engines emissions-cheating scheme, Daimler still denied any liability, which of course, but it’s funny to point out. From Reuters:

Daimler said in August it expected costs of settlements with U.S. authorities would total $1.5 billion, settling with owners will cost another $700 million and also disclosed “further expenses of a mid three-digit-million EUR (euro) amount to fulfill requirements of the settlements.

Deputy Attorney General Jeff Rosen said the settlements, which follow a nearly five-year investigation, will “serve to deter any others who may be tempted to violate our nation’s pollution laws in the future.”

In court documents, Daimler agreed to pay 250,000 owners up to $3,290 each to get polluting vehicles repaired and agreed not to oppose paying $83.4 million in attorneys fees and expenses for the owners’ lawyers. Owners will get $800 less if a prior owner files a valid claim.


I would like Deputy Attorney General Jeff Rosen to think about deterring “any others who may be tempted to violate our nation’s pollution laws in the future” by shifting his focus to the entire Republican party and the businesses of the American economy. Keep up the tough talk and look inward, but I bet he won’t.

(Correction note: A previous version of this section claimed Volkswagen and Daimler were related companies, when they are in fact competitors. That was stupid.)


5th Gear: Railways Are Fucking Expensive

Last week, the Wall Street Journal reported that the major American railway company Kansas City Southern turned down a massive $23 billion offer during a global pandemic because, well, rail companies apparently make a lot of money for a long time. That makes them very expensive.


Today, Bloomberg has a breakdown on why Kansas City Southern may have felt comfortable turning down so much money in such a precarious time for the global economy:

Kansas City Southern investors don’t seem too miffed at the prospect of the suitors walking away. Raymond James Financial Inc. analyst Patrick Tyler Brown raised his price target on the company to $210, but not because of the takeover talk, which he deemed “noise.” Instead he cited efficiency gains and the prospects for Kansas City Southern’s railroad business between the U.S. and Mexico as manufacturers look to localize supply chains.

As of early September, daily volumes were back at pre-pandemic levels, thanks in part to a rebound in cross-border traffic and energy-related shipments, Kansas City Southern Chief Financial Officer Mike Upchurch said in a presentation on Sept. 9. The company is reinstating its goal of reducing its operating ratio—a measure of profitability for which a lower number is better—to 60% to 61% this year, compared with an adjusted metric of 63.2% in 2019.


When Warren Buffet bought Burlington Northern Santa Fe for $36 billion, he pitched it as “an opportunity to buy a business that’s going to be around for 100 or 200 years.” I wonder if he knows what’s going to happen to him before that time elapses, or if he has a budget for that, too.

Reverse: 160 Years Later It’s About To Lose It

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