Jeff Ubben, the founder of activist hedge fund ValueAct and an early investor in Nikola, has strenuously defended the electric truck start-up and its leadership against fraud allegations from a short-seller. 

In an interview with the Financial Times, Mr Ubben, who sits on Nikola’s board of directors, said the company and its founder Trevor Milton were misunderstood. He said Nikola could revolutionise transport and compared it to Apple.

Nikola, which went public in the US earlier this year, says it designs and manufactures trucks that run on hydrogen fuel cells or batteries, and hydrogen fuelling stations. The company aims to generate revenue next year.

In a scathing report released last week, short-seller Hindenburg Research called Nikola “an intricate fraud” and claimed the company was exaggerating progress on its potentially revolutionary technology.

“Nikola is a prototype shop,” Mr Ubben said. “You have the biggest company in the world which is a prototype shop and it’s called Apple. That is what we are doing. We are not trying to sell trucks, we are trying to sell hydrogen.”

Mr Ubben recently left ValueAct, taking with him an environment-focused investment fund that he now runs at a new firm called Inclusive Capital Partners. That fund has an investment in Nikola.

Mr Ubben sold more than half the Nikola stake in late August and he now has 5 per cent of the company, versus 12 per cent before. The sale was forced on him by investor redemptions during the transition from ValueAct, he said.

Nikola shares have fallen 40 per cent since the publication of the report by Hindenburg, which as a short-seller profits if Nikola’s stock price declines. The US Securities and Exchange Commission is looking into Nikola to examine Hindenburg’s claims and the Department of Justice has contacted people familiar with the company, the Financial Times revealed on Tuesday. 

Hindenburg alleged Nikola faked a video and passed off technology it had bought as its own. In a detailed rebuttal published on Monday, Nikola and Mr Milton countered what they described as “false and misleading statements” by Hindenburg. 

Mr Ubben said he took umbrage at the renewed focus on the marketing video posted in 2018, that Hindenburg said was made to look like the truck was being driven. Nikola admitted that the truck in the video, which appeared to be driving, was rolled down a hill but said it had never claimed the truck was moving “under its own propulsion”. 

Mr Ubben also bristled at Hindenburg’s comparison of Nikola to Theranos, the failed blood-testing start-up whose founder Elizabeth Holmes is charged with perpetuating a multibillion-dollar fraud by pretending to have developed a revolutionary technology. Mr Ubben called the comparison “absolutely absurd” since Nikola now has a working vehicle.

Nikola is currently developing a hydrogen cell battery, he said, but the real profit will come from hydrogen stations, which he said were about seven or eight years away.

The bulk of Nikola’s value lies in that hydrogen network, he said, not the trucks itself.

“We are different from Tesla. They are going to make their money on cars and trucks. That’s a tough model. We will be selling fuel to all the other hydrogen vehicles. It is the end game solution,” Mr Ubben said.

“It turns out our business model, to be a system integrator, is not well understood. And that is a problem.”

Additional reporting by Claire Bushey and Billy Nauman


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