By Al Edwards

Electric and hydrogen-powered truck company Nikola continues to see its reputation called into question. This has led to its share price continuing to tank from a high of US$93 earlier this summer.

Last month its founder and executive chairman Trevor Milton had to ignominiously step down after a damming report from Hindenburg Research pointed out a number of  Nikola’s shortcomings and suggested that the company’s founder was all bluster.

It wrote off his company as being nothing more than smoke and mirrors with no proven record of accomplishment. It must be made clear here that Hindenburg was short-selling the stock and information that served to denigrate Nikola would serve to benefit the investment firm. Nevertheless, Nikola made a number of fundamental mistakes that stand as a cautionary tale and underscores the importance of delivering on your proclamations.

Especially in high-stakes business, a proven track record helps…a lot

Nikola is named after the wunderkind Serbian-American inventor Nikola Tesla who made great strides in the alternating current generation and transmission technology.

But before Nikola was launched, Tesla, the electric car maker headed by CEO Elon Musk was already a household name and well on its way to establishing itself as a market leader.

Milton must have known that to name his company Nikola would immediately bring to mind what the car company Tesla is all about and ran the risk of being perceived as an imitation of what Musk has built. It’s one thing to admire the genius that was Tesla, it’s another to stake your brand on what is already established.

This brings to mind the Eddie Murphy movie Coming to America, where his character, an African prince toils away unnoticed as a lowly janitor at the fast-food restaurant McDowell’s, an obvious imitation of renowned restaurant behemoth, McDonald’s.

Put another way, think of an athletic shoe company called ‘Speed Goddess’ which is in direct competition with Nike. It beggars’ belief why Milton would take this approach to branding his company. One should always keep an eye on competitors but should never be noticeably co-opting their distinct features. It’s probably best to set your own.

A boss has to back up claims made. As the Stetsasonic song ‘Don’t Let Your Mouth Write A Check That Your Ass Can’t Cash’ says, “Cos when you talk the talk and your talk is kinda cheap, you reap what you sow and you sow what you reap.” Actions always speak louder than words. Milton made a number of claims that he should have backed up.

Milton is a mercurial salesman, of that, there can be little doubt.  It’s a valuable quality to have when building a business. In order to lend greater credibility to the brand, he should have seen to it that Nikola went to market with proprietorial technology, manufactured a fully built vehicle that could be driven and tested by journalists and industry specialists, and his hydrogen cell and electric battery technology should have been indisputable and cost-competitive.

The former chairman of Nikola once said: “ Very few people can out Elon Musk in this world, I’m one of them. The Nikola founder goes on to declare that Tesla is “just really following in our footsteps”. Now that is a huge claim! Rather than focusing on his deliverables, he’s focused on Elon Musk.

Nikola was founded in 2014 and is based in Phoenix, Arizona. It designed and is looking to bring to market the Nikola One and Nicola Two electric semi- trucks powered by a hydrogen fuel-cell. Milton promised to bring to market zero-emissions vehicles that would revolutionise modern transportation. This excited investors, some seeing Nikola as the new Tesla with its founder talking a good game.

Surely Milton’s enthusiasm and salesmanship would be able to carry the day. Nikola’s IPO took place in April of this year. Participating in a reverse merger with Vectol IQ Acquisition Corporation (a special purpose acquisition company), Nikola began trading on the Nasdaq on June 4 with its share price kicking off at US$37.55.

Milton owned 35 per cent of Nikola’s stock. By June 9, intraday trading saw its share price soar to US$93.99 giving it a market cap of US$34 billion. This saw a company, with no revenue forecasted for 2020, have a higher market cap than Ford Motors and Fiat Chrysler.

Milton announced he was taking preorders for Nikola’s Badger pick-up truck and proclaimed, “My goal is to take the throne from the Ford F-150.” The F-150 has remained the United States’ number one pick-up truck since 1977. With growing confidence but no revenues to speak of, Nikola scored a coup in September with GM coming on board with an 11 per cent stake in the company valued at US$2 billion.

It would also be the supplier of parts for Nikola’s Badger as well as become the exclusive supplier of fuel cells globally (outside of Europe) to Nikola for the Badger. This was a nice piece of business for a still-to-be-proven electric truck that had yet to come to market.

The Nikola-‘what if’ complex

How much better it would have all worked out for Milton if he had laid low, built a magnificent working hydrogen-cell fuel truck, and then gone on with a proven record to build other vehicles? This approach would have fostered more confidence in the Badger and faith in his ability to bring it to market.

Of the Badger, Milton said it is the “coolest electric pickup truck the world has ever seen”. It does look great in renderings but it was largely incomplete, a drawn concept yet to be fully fleshed out – a promise for tomorrow. In Jamaica, there is a financial services house called Proven where all the major principals have stellar reputations and a track record of success. Proven. What a calling card! It tells clients, investors, the world, we are experienced and know what we are talking about.

This is a firm foundation for an enterprise. Milton didn’t go this route and now he has to suffer the lash of corporate and investor opprobrium. All his pronouncements are now being carefully scrutinised; so too are his past business ventures and the way he operates. His character is being placed under a microscope and the qualifications, abilities, and experience of some of his senior executives are being questioned.

Even the fact that he sold some of his Nikola stock relatively early put him in many analysts’ crosshairs. Nikola may well have been a good idea with potential. Milton should have made it so, bringing it to reality. His mantra should have been deliver, deliver, deliver. The intention was to leverage GM’s supply chain and to start building trucks later this year, rolling out between 35,000 to 50,000 a year by 2023.

Given the bad press, the likelihood that Nikola will find it difficult to be vertically integrated (no firm date in sight for the installation of hydrogen fuel stations across the United States), the intense level of scrutiny, and with potential partners like BP running for the hills, is that deadline now likely to be realised? If Nikola can truly deliver despite all the negativity and vitriol it has come under, then it can proclaim with pride that its pre-orders are justified.

It was a bad move on Milton’s part to overtly take an adversarial stance against Musk, making claims that put undue pressure on himself. Better to allow the product to do the talking.

Henry Ford’s Model T was truly revolutionary largely because it fundamentally changed transportation, not because it was an idea or a rendering that promised to do so. It was real and could and was brought to production. The Badger looks fantastic, of that there is plenty of agreement. Milton says it comes in an electric or hydrogen-charged version and will travel over 600 miles on a single charge. That’s exciting, but focus on delivering rather than dissing. Musk has proven he can deliver.

A comparison with Tesla

Before Elon Musk built Tesla into a major electrical vehicle brand, he had already announced his presence with PayPal and SpaceX. He sold his first piece of code at just 13. At 24 he received an undergraduate degree in economics from the Wharton School of Business. He also picked up a degree in physics. After dropping out of Stanford where he was to pursue a Ph.D. in physics, he started a software company with his brother with a US$28,000 loan from his father.

After four years, he sold that company to Compaq for $307 million and $34 million in stock options. He went on to form PayPal which was sold to eBay for $1.5 billion. Musk is brilliant with a proven track record. He doesn’t simply talk a good game, he delivers on his vision. Tesla today is synonymous with cool, classy electric vehicles.

Tesla’s IPO took place in June 2010, 10 years before Nikola’s listing. Tesla’s market cap has moved from US$1.7 billion to US$464 billion and its share price from US$17 to over US$1,000 during the last decade. Ron Barron believes Tesla can book US$1 trillion in revenues by 2030.

Tesla’s stock price has gone up 400 per cent this year. “The thing that Tesla has been able to achieve is get to volume manufacturing and have sustainable positive cash flow. From a car company standpoint, that is the real achievement,” Musk has said.

Today, both Tesla and Elon Musk are household names. Musk has gone on to form SolarCity, one of the largest solar power companies in the US.

Musk has captured the public’s imagination. He has a cool persona. He once said, “Life has to be about more than solving problems”. Unlike many of the tech billionaires of today, he is the one you feel you can have a beer and a burger with, have a bit of a laugh. He is extremely intelligent, accomplished and personable.

It’s one thing to think big, another to deliver and bring it to reality. Tesla is expected to deliver over 500,000 vehicles this year. Now that’s impressive coming from around 2650 vehicles, two years after its IPO. Last month, Milton announced that he was stepping down as executive chairman of Nikola the company he founded.

Milton remains Nikola’s largest shareholder. He now joins the pantheon of corporate founders who prematurely stepped down from the companies they formed – think Steve Jobs of Apple, Travis Kalanick of Uber, Larry Page, and Sergey Brin of Alphabet and, of course, Elizabeth Holmes of Theranos.

On stepping down, Milton said: “ Nikola is truly in my blood and always will be and the focus should be on the company and its world-changing mission, not me. As a result, I made the difficult decision to approach the board and volunteer to step aside as executive chairman. Founding Nikola and growing it into a company that will change transportation for the better and help protect our world’s climate has been an incredible honour.”

It has to be said that accusations of fraud leveled at Milton have not been proved. Claims that Nikola’s proprietary technology was acquired from another company will of course raise eyebrows.

GM’s decision-making and due diligence process are also being questioned. But the American vehicle maker is keeping faith with Nikola and believes its hydrogen cell and electric vehicles have a future. It is truly sad to see a company listed in June unraveling and its reputation being shredded before the end of September.

Moral of the story? In the words of Tuco in ‘The Good, the Bad and the Ugly’: “When you have to shoot, shoot; don’t talk.”