Comment by zaroth
4 years ago
I think it’s a bit funny how some discussion in this thread has veered into denigrating Musk — who is at times one of the ten richest people in the entire world, and who ships products that millions of people have bought or aspire to purchasing, and who is predominately responsible for ushering in this entire era of the electronic car.
Don’t forget that “Hindenburg Research” (seriously?!) stands to make many tens or hundreds of millions of dollars based on whether they can convince a significant number of shareholders that what they are claiming is true. And also that if they are successful in doing so that it also becomes a self-fulfilling prophecy.
I have no reason to believe or disbelieve any claims being made in TFA, so the only thing I can say for sure is that that this “report” is in no way altruistic.
One of the very precarious notions around short selling is the financial incentive it provides to ruinously slander a company, and the very meager legal protections a company has against defamatory claims that short sellers make — in the name of “analysis” — against a company that they stand to make a fortune from if it fails.
Without knowing anything one way or another about Nikola, the only thing I can say for certain is that if Nikola misstates a material fact to investors they can go to jail, whereas if “Hindenburg” gets their facts entirely wrong they face no repercussions. They have no duty to the shareholders of Nikola stock, and the legal peril of being even willfully wrong in their analysis is minuscule compared to what Nikola officers could face from the SEC.
That’s just the grain of salt I would carefully consider before reading anything that Hindenburg puts out.
Are you long on Nikola?
The group releasing the report stands to lose their position if their claims are false or even if the market ignores them. I’d argue it’s a lot harder to convince a bunch of people with long positions making the market that they pumped the wrong company than it is for the makers to ignore the ruse long enough to diversify the inevitable failure and pass it into your retirement fund.
You don't just short companies for fun with no ramifications. I think you’re painting an exaggerated picture of the nature of taking down a company. You only attempt to do so if you are extremely sure of your convictions and have overwhelming evidence to support your case. You make enemies and you risk losing your connection to other market makers.
I came across Nikola last month and didn’t need a report like this to smell something fishy. But this one is especially damning. I see no reason to not believe the evidence in the report.
Not long on Nikola, and like I said, I am not making any judgement on the facts or evidence presented whatsoever.
But I was long Tesla during a similar period in their own existence, while short sellers tried to make a similar case that Tesla was a fraud and certain to go bankrupt any day.
There is always a strong reason to question a report when the authors have an extremely vested interest in people believing it, and in fact when the objective truth of whether they are right is less important than how many people they can make believe that they are right.
You're making an underappreciated point: Activist short sellers can be capable of torpedoing a company that would have been successful in their absence, if the company's development depends on financing and goodwill.
It does present a bit of an ethical conundrum. Is it ethically correct to not point out something you believe to be fraudulent?
It's certainly unethical to deliberately slander something you believe to be viable, purposes of profit or not, but it can be hard to tell the difference when judging any such initiative.
I could see the case for banning advocating a short position, reasoning in terms of market manipuiation, but I don't think it's clear-cut. Was also a very close observer to the Tesla shennanigans two years ago, and there were some shameful tactics being used at the time.
Yes, "Hindenburg" is a bit on the nose, and they own up to it on their "About" page[0]:
>We view the Hindenburg as the epitome of a totally man-made, totally avoidable disaster. Almost 100 people were loaded onto a balloon filled with the most flammable element in the universe. This was despite dozens of earlier hydrogen-based aircraft meeting with similar fates. Nonetheless, the operators of the Hindenburg forged ahead, adopting the oft-cited Wall Street maxim of “this time is different”.
>We look for similar man-made disasters floating around in the market and aim to shed light on them before they lure in more unsuspecting victims.
Looking at this piece I feel like Mark Baum when he met Greg Lippman (changed to Jared Vennett in "The Big Short"): They are "so transparent in [their] self-interest, I kind of respect them."
[0]:https://hindenburgresearch.com/about-us/