June 2020.
Ford was worth about $25 billion.
Which means, the company’s market capitalization was $25 billion.
A truck-making company had just become public.
Its name – Nikola.
In June 2020, even Nikola was worth about $25 billion.
Ford is one of the world’s biggest car and truck companies.
Nikola – was a new player. How did it manage to get so big so fast?
Ford sells millions of cars and trucks every year.
How many did Nikola sell?
Nikola
Nikola was a company established only 6 years before its shares became available on the share markets – in 2014.
On May 9, 2016 – Nikola announced a new truck. It was called the Nikola One.
The company said that it could travel 1000 miles after one filling. It was fueled by Compressed Natural Gas – not diesel, not electricity.
Environmentally clean ways of transporting goods have been a challenge for a long time.
While electric cars are starting to become mainstream, electric trucks have not.
One of the biggest challenges is the time it takes to charge trucks’ batteries – it takes hours (as opposed to a few minutes in the case of diesel).
So when Nikola announces this tech, many investors are sitting up and listening.
A few months later, Nikola announced a revolutionary change.
Instead of using compressed natural gas, their truck would be fueled by Hydrogen – supposedly an even cleaner fuel.
Hydrogen has long been touted by many as the fuel of the future.
But some key challenges keep holding it back.
In 2016, Nikola promised they would have a ready and functioning hydrogen fuel truck.
In December 2016, Nikola finally showed the truck to the world.
At the reveal event, as journalists watched on, Nikola finally presented their truck to the public – the Nikola One was real.
Journalists asked questions and wanted to know more.
In a video, the founder of Nikola can be seen sitting inside the truck with a journalist answering questions.
Many times, companies show demonstration pieces of their vehicles that look like the final product – but don’t actually work.
Nikola’s founder emphasized that the truck they were sitting in was a working and functional truck.
The truck captured the fascination of everyone.
A hydrogen truck that actually worked – long due!
The Nikola One truck went absolutely viral.
Social media was abuzz with talks about the new truck company.
Its name – Nikola – was the first name of the famous inventor Nikola Tesla.
His surname – Tesla – is also the name of another car company. The one headed by Elon Musk.
Thanks to this wide-scale publicity, Nikola was about to get more deals done.
Even giant companies like Bosch were interested in working with Nikola.
After the December 2016 event, not much was heard from the company.
People had seen the truck only during the event – where it was on a stage.
Nobody had seen it on the road. Nobody had seen it moving.
Some skeptical people started voicing their opinions online.
For about a year, Nikola kept working without making much noise.
Then, in January 2018 the company released a video that would silence all skeptics and nay-sayers.
The video showed a Nikola One truck, moving on the road, under its own power. Its lights were on. And it looked like a modern truck – the kind of design that was entirely new.
With that one move, the company had managed to silence many of its critics.
Progress was visible. The truck was real.
A common criticism of hydrogen as fuel was that it was expensive to make – it cost nearly 3 times what electricity costs.
Nikola soon informed the world that it was making its own hydrogen. And that their methods allowed them to make the gas at a cost that was 80% less than others.
In an interview, the company also informed that Nikola trucks were cheaper than diesel trucks (running cost per mile).
On November 19, 2019, Nikola announced a high-density battery.
This battery would be able to provide 4 times more energy than a standard lithium battery (the kind found in cars).
IPO and Beyond
Seeing these announcements, investors and customers started looking up to Nikola.
The company received its first large order of 800 trucks from a company.
On June 4, 2020, Nikola became a publicly listed company.
The stock was a success – investors kept pouring more money into buying shares of Nikola.
As they did so, its share price kept climbing.
It was at this point in time when Nikola’s market capitalization became similar to that of Ford’s – around $25 billion.
This made Nikola the world’s biggest truck maker.
In September 2020, General Motors announced that it was investing $2 billion in Nikola and would come to own over 10% of the company’s shares.
The two companies announced building a pick-up truck together.
Unraveling
Until this point, Nikola had not delivered a single truck to their customers.
But it was the biggest truck company in the world – by virtue of the company’s market capitalization.
Investors had huge expectations from the company.
On September 10, 2020, a short seller (Hindenburg) published a report about how Nikola was a fraud.
They published a detailed report about how the company had completely lied about the technology they had.
In fact, the report even claimed that the company had no working truck.
After this report was published, the CEO said that he would categorically answer all questions asked of him.
Soon after that, instead of answering questions, he deleted his social media account.
Nikola’s fraud had been uncovered.
The CEO quit the company.
Everything had been a lie.
The truck was not real – it did not have a hydrogen or electric engine.
To shoot the video, they had taken the truck to a road with a very gentle slope – and rolled down the truck under its own weight.
They did not have any high-density battery technology.
None of their trucks were ready.
What makes all of this even more unbelievable is that companies like Bosch and General Motors got involved with Nikola.
And despite that, they did not realize they were being scammed.
The Nikola company’s stocks kept crashing.
Today, the company’s market capitalization is about $100 million (down from ~$25 billion).
The CEO was put to trial – he was fined and jailed.
The company continued to operate under a new management that was trying to turn it around.
It has not seen much success so far.
The images above were generated using AI tools.
Quick Takes
+India's forex reserves fell by $4.11 billion to $640.28 billion during the week that ended on 27 December.
+Manufacturing growth fell for the US, the UK, the Euro Area, and China in December 2024 as compared to November 2024, as shown by the PMI data.
+India’s manufacturing PMI fell to 56.4 in December (vs 56.5 in November). Manufacturing growth in 2024 was the slowest in December.
+Blinkit (owned by Zomato) has launched a 10-minute ambulance service in Gurugram, Haryana, starting with 5 ambulances.
+Varun Beverages has invested Rs 413 crore in its South African subsidiary, The Beverage Company Proprietary Limited, to repay its debt and for business growth.
+GrossGST collection rose 7.3% year-on-year to Rs 1.77 lakh crore in December. Net GST collection (gross minus refunds) rose 3.3% to Rs 1.54 lakh crore.
+Total number of UPI transactions rose 39% year-on-year to 1,673 crore in December. The total transaction amount through UPI rose 28% to Rs 23.25 lakh crore.
+NPCI has lifted the UPI user onboarding limit for WhatsApp Pay. The company can now offer UPI services to its entire user base in India.
+Air India has launched an in-flight WiFi service in its Airbus A350, Boeing 787-9, and select Airbus A321neo aircraft. The service is free for an introductory period. Air India is the first Indian company to offer WiFi service on domestic flights.
+TCS has fixed the record date as 17 January for a third interim dividend. The dividend will be decided and approved in a board meeting on 9 January.
+India’s infrastructure output rose 4.3% year-on-year in November (vs 3.7% in October). Output rose for cement, coal, steel, electricity generation and fertilizers. But fell for crude oil and natural gas.
+Adani Enterprises will sell its entire 44% stake in Adani Wilmar— 31% stake to Wilmar International and 13% to meet the minimum public shareholding requirement. The company will use the sale amount for its infrastructure business.
6-Day-Course
Theme of the week: currency
We’ve reached the end of this week’s course that started on Monday. Here’s a test you should take. Get pen and paper!
Question 1:
An exchange rate of a currency represents ___________________.
-Value of gold
-Market inflation
-Price of one currency in another
Question 2:
Fiat currencies are backed by an asset like gold, foreign exchange reserves, etc.
-True
-False
Question 3:
If foreign companies invest heavily in India, what happens to the INR?
-INR value rises
-INR value falls
-INR remains stable
Question 4:
Political events can affect exchange rates.
-True
-False
Question 5:
Currencies are usually issued by the _______________.
-Central government
-Central bank
-Commodity exchanges
Answers:
Q1: Price of one currency in another
Q2: False
Q3: INR value rises
Q4: True
Q5: Central bank
The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.
Team Groww Digest