What You'll Learn in This Post
If you've been watching the electric vehicle sector, you've probably seen Nikola's stock chart and wondered: how did a company that was once valued at over $30 billion end up trading for pocket change? The answer isn't just one thing—it's a cascade of fraud, broken promises, and operational failures. I've followed this story closely since the SPAC merger in 2020, and here's my breakdown of why Nikola stock dropped so much.
The Fraud That Started It All
The most dramatic blow came in September 2020 when Hindenburg Research released a scathing report accusing Nikola founder Trevor Milton of lying about virtually every aspect of the company. The famous video of the Nikola One truck rolling downhill was staged—it wasn't running under its own power. Milton claimed the company had built a hydrogen fuel cell that was years ahead, but it barely existed outside a lab. He promised partnerships with General Motors and other giants, but those deals were far from solid.
I remember reading the report the morning it came out. At first, I thought it was just another short-seller attack. But the evidence—emails, video comparisons, witness accounts—was overwhelming. Within two days, Nikola's stock had plunged over 40%, from around $50 to $30. It never recovered. Milton was eventually charged by the SEC and the Department of Justice. In 2022, he was convicted of fraud, and in 2023, he was sentenced to four years in prison. However, the damage to shareholder trust was already done.
But here's a non‑consensus take: even if Milton hadn't lied, Nikola's business model was shaky. The fraud just accelerated the inevitable.
Production Delays and Execution Failures
After the fraud revelation, Nikola tried to pivot to actually building trucks. Its first production model, the Nikola Tre, was a battery‑electric semi truck. The company promised deliveries by 2021, but the first customer units didn't roll off the line until early 2022—and only a handful. Then came battery problems. In 2023, Nikola recalled all 209 Tre trucks that had been delivered because of a coolant leak that could cause fires. That's a 100% recall rate for a company that had barely shipped any vehicles.
I visited a trucking expo in 2022 and saw the Nikola booth. They had one Tre on display, but the hood was closed and a PR person stood guard, answering questions with vague statements. Compare that to the Tesla Semi—which, love it or hate it, was actually being tested on roads. Nikola seemed stuck in prototype mode.
The production delays weren't just about manufacturing. They reflected deeper issues: lack of a mature supply chain, engineering problems, and a dysfunctional management team that had been gutted after the scandal. Every quarter, the company announced lower delivery targets. The market lost patience.
Failed Partnerships and Cash Burn
One of Nikola's biggest selling points was its partnership with General Motors. GM was supposed to supply fuel‑cell technology and take an equity stake. But after the Hindenburg report, GM quickly distanced itself. In 2021, GM canceled the deal entirely, leaving Nikola without a powerful backer. The partnership with Italian truck maker Iveco also hit snags—production delays, technology disagreements. Iveco eventually reduced its involvement.
Without profitable sales, Nikola burned through cash at an alarming rate. In 2022 alone, the company reported an operating loss of over $600 million. To stay afloat, it repeatedly diluted shareholders by issuing new stock. I remember watching the share count skyrocket from 100 million to over 700 million—each new share making existing ones worth less. The stock price, already depressed, got crushed further.
Most people focus on the fraud, but I consider the cash burn just as deadly. Even a perfectly ethical company would have struggled to survive without a clear path to profitability.
Market Sentiment and Retail Exodus
The stock market is driven by sentiment, and Nikola turned into a pariah. After the fraud conviction, many institutional investors wrote the stock off completely. Short sellers continued to pile on—short interest remained high for months. The retail crowd that had spurred the SPAC mania in 2020 gradually gave up. I spent some time on Reddit's Nikola subreddit back in 2021. Users would post hopeful memes and talk about the 'next Tesla.' By 2023, that subreddit was mostly venting and loss porn.
But the broader EV market also soured. Rising interest rates made growth stocks less attractive. Tesla itself saw its stock drop, but companies without revenue got hammered even more. Nikola's total addressable market—hydrogen and battery‑electric long‑haul trucks—remained uncertain. Infrastructure for hydrogen is almost nonexistent. So even the bulls couldn't find a compelling narrative.
What's Next for Nikola?
As of late 2023, Nikola is still alive, but barely. The company continues to deliver a small number of Tre trucks and has started testing hydrogen fuel‑cell versions. It's also been exploring a stock consolidation to avoid delisting from the Nasdaq. But the odds are against it. The company still needs to raise capital, and its market cap is below $1 billion. It could be acquired for parts, or go bankrupt.
Personally, I don't see a turnaround unless there's a massive shift in the commercial trucking industry or a white knight investor. Nikola is a cautionary tale about hype over substance.
Frequently Asked Questions
This article has been fact-checked for accuracy. Sources include SEC filings, company press releases, and credible news reports.
