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I haven't paid a lot of attention to Nikola and was surprised when a friend said they had gone public and saw their valuation. This one always felt like a frau

I haven't paid a lot of attention to Nikola and was surprised when a friend said they had gone public and saw their valuation. This one always felt like a fraud when it was private. How was it able to go public? Isn't that supposed to root out these things? Hearing about their revenue was an eye opener for sure. Side note, I always wonder about the WeWorks and Nikola's of the world. The founders, who are obvious frauds in retrospect, still probably walk away with hundreds of millions if not a few billion. Sometimes it feels like being a decent human being doesn't pay off. Doesn't help that our current political environment is also rewarding the worst in us too

cultus 6y ago
I think this whole debacle really brings into focus how poor of a job our bloated financial markets do at allocating capital. Literally their one purpose that justifies their existence, and they are comically bad at.
- adventured 6y ago
  The US market is eventually correct (which is exactly what you're seeing with Nikola getting properly dismantled), not efficient on every trade or even short-term. I think your premise fundamentally misunderstands how very large, liquid markets with huge numbers of participants like the US stock market actually function. To paraphrase a famous quote from Ben Graham: short-term the market is a voting machine (prone to trends, mania, over-reactions both directions), long-term it's a weighing machine (value will out). That's still spot on all these decades later. There is about $36 trillion in value in the public US markets. Can you support your premise that Nikola is somehow relevant as a point of evidence that the broad financial markets do a poor job of allocating capital? Nikola is barely a rounding error in the scheme of the US financial markets.
  - cultus 6y ago
    Financial markets grossly misjudged risk and caused the 2008 financial collapse. The recession previous to that was caused by a tech bubble that saw Pets.com with a greater valuation than GE. These incidents of irrationality have huge long-term effects on the real economy. The middle and lower class never recovered from 2008. Those were on markets and their irrationality. We are currently in giant asset bubble (enabled by the Fed, but still) in the middle of the worst recession since the Great Depression. It will crash, and take the economy with it. As far as allocating capital, the markets have systematically discouraged investment and encouraged stock buybacks and other uses of money that not only don't promote the real economy, but increase risk (necessitating more bailouts). Our finance industry systematically pushes industries into rent-seeking instead of production, as well as increasing financialization. Sure, Nikola isn't significant in things, but it is a microcosm of how the market as a whole operates.
    - pas 6y ago
      Why do you say they misjudged the risk? They got bailed out, the regulations that were enacted in 2008 with big fanfare were/are being slowly but surely rolled back, metrics are good, business has been booming for 10+ years until COVID, but even now "the assets are safe". The middle class is being displaced by automation and capital consolidation: [pdf] https://economics.mit.edu/files/11563 https://economics.mit.edu/files/11563 and https://economics.mit.edu/files/12979 https://economics.mit.edu/files/12979 Since yields/returns are so low, it's no wonder rent seeking is the "new" hot shit. Returns are low because there's no aggregate demand, because the middle class disappears, see above. And so the vicious cycle does what it does. Agreed on Nikola just being a small symptom. See also WeWork.
moneywoes 6y ago
It was able to go public view a SPAC
- fingerprinter 6y ago
  Thanks for clarifying. I didn't know they used a SPAC. For sure going to see more and more fraud via those until some new mechanisms are introduced.
chadash 6y ago
I would argue that public markets very much DID do their job here. Once you are public, people can go long or short your stock, unlike private companies where the latter is hard. In this case, someone took a large short position and then went public with accusations against the company. Now the stock is down. Assuming that the accusations are at least partially credible, sounds like a functioning market to me.
- hyperpape 6y ago
  It's a good start, but their market cap is still 11 billion. For reference, Ford is 27 billion.
  - pas 6y ago
    The idea seems sane. Maybe GM will execute it. Or some new management.
    - reducesuffering 6y ago
      11 billion for an "idea" isn't sane. The hydrogen tech doesn't exist and possibly never will. Other auto manufacturers are struggling with it. As to the electric truck? Others are far ahead.
      - pas 6y ago
        Well, when the VC market quickly put together 40 billion for renting office space, so 11B isn't that much nowadays. There are already around 40 fuel cell stations just in CA, there's similarly around 45 in Germany.
- kiba 6y ago
  I watched a youtube video on the subject, and I was easily left with the impression that it's a very shady company. And I am not an investor in startups in any stretch of imagination. Yet, people still invest millions, if not billions of dollars into this company.
- 6y ago
mongol 6y ago
Being a decent human being pays off at least in terms of self respect. I guess for certain people it does not matter how they earn money, be it through fraud or honest work. But I don't think I would be happier if I was a fraudulent multi-millionaire.
- KorfmannArno 6y ago
  I'd definitely be happier being a fraudulent multi-millionaire.
  - pas 6y ago
    How do you know?
    - Loughla 6y ago
      With enough money, I'm like 99% sure I could put some fraud to bed in my conscience. From what I can tell, success tends to help people justify their actions in hindsight. So maybe there's something psychological there to help me forget, anyway. If nothing else, as a billionaire, I could afford to do extremely good works to help people forget about how awful I was in the early days (remember when Bill Gates was the devil? I do).
      - pas 6y ago
        Thanks for the reply! Yeah, I vividly remember how people were constantly reminding each others about the evils of M$ and Gates. But even his ruthlessness wasn't fraud, right? Usually enterprise software simply stifles software engineering because of the very short-term oriented for-profit approach. Which leads to burnout, but ... still not exactly fraud.
        mongol 6y ago
        Agreed, I don't think Gates can be descibed as fraudulent. He was like you say a ruthless businessman. But that is different than what this Nikola founder seems to have been.
ActorNightly 6y ago
>How was it able to go public? Plenty of people talk about the cancer present in VC culture. Engineering doesn't matter as long as you can tell a good story.

cultus 6y ago

I think this whole debacle really brings into focus how poor of a job our bloated financial markets do at allocating capital. Literally their one purpose that justifies their existence, and they are comically bad at.

adventured 6y ago
The US market is eventually correct (which is exactly what you're seeing with Nikola getting properly dismantled), not efficient on every trade or even short-term. I think your premise fundamentally misunderstands how very large, liquid markets with huge numbers of participants like the US stock market actually function. To paraphrase a famous quote from Ben Graham: short-term the market is a voting machine (prone to trends, mania, over-reactions both directions), long-term it's a weighing machine (value will out). That's still spot on all these decades later. There is about $36 trillion in value in the public US markets. Can you support your premise that Nikola is somehow relevant as a point of evidence that the broad financial markets do a poor job of allocating capital? Nikola is barely a rounding error in the scheme of the US financial markets.
- cultus 6y ago
  Financial markets grossly misjudged risk and caused the 2008 financial collapse. The recession previous to that was caused by a tech bubble that saw Pets.com with a greater valuation than GE. These incidents of irrationality have huge long-term effects on the real economy. The middle and lower class never recovered from 2008. Those were on markets and their irrationality. We are currently in giant asset bubble (enabled by the Fed, but still) in the middle of the worst recession since the Great Depression. It will crash, and take the economy with it. As far as allocating capital, the markets have systematically discouraged investment and encouraged stock buybacks and other uses of money that not only don't promote the real economy, but increase risk (necessitating more bailouts). Our finance industry systematically pushes industries into rent-seeking instead of production, as well as increasing financialization. Sure, Nikola isn't significant in things, but it is a microcosm of how the market as a whole operates.
  - pas 6y ago
    Why do you say they misjudged the risk? They got bailed out, the regulations that were enacted in 2008 with big fanfare were/are being slowly but surely rolled back, metrics are good, business has been booming for 10+ years until COVID, but even now "the assets are safe". The middle class is being displaced by automation and capital consolidation: [pdf] https://economics.mit.edu/files/11563 https://economics.mit.edu/files/11563 and https://economics.mit.edu/files/12979 https://economics.mit.edu/files/12979 Since yields/returns are so low, it's no wonder rent seeking is the "new" hot shit. Returns are low because there's no aggregate demand, because the middle class disappears, see above. And so the vicious cycle does what it does. Agreed on Nikola just being a small symptom. See also WeWork.

moneywoes 6y ago

It was able to go public view a SPAC

fingerprinter 6y ago
Thanks for clarifying. I didn't know they used a SPAC. For sure going to see more and more fraud via those until some new mechanisms are introduced.

chadash 6y ago

I would argue that public markets very much DID do their job here. Once you are public, people can go long or short your stock, unlike private companies where the latter is hard. In this case, someone took a large short position and then went public with accusations against the company. Now the stock is down. Assuming that the accusations are at least partially credible, sounds like a functioning market to me.

hyperpape 6y ago
It's a good start, but their market cap is still 11 billion. For reference, Ford is 27 billion.
- pas 6y ago
  The idea seems sane. Maybe GM will execute it. Or some new management.
  - reducesuffering 6y ago
    11 billion for an "idea" isn't sane. The hydrogen tech doesn't exist and possibly never will. Other auto manufacturers are struggling with it. As to the electric truck? Others are far ahead.
    - pas 6y ago
      Well, when the VC market quickly put together 40 billion for renting office space, so 11B isn't that much nowadays. There are already around 40 fuel cell stations just in CA, there's similarly around 45 in Germany.
kiba 6y ago
I watched a youtube video on the subject, and I was easily left with the impression that it's a very shady company. And I am not an investor in startups in any stretch of imagination. Yet, people still invest millions, if not billions of dollars into this company.
6y ago

mongol 6y ago

Being a decent human being pays off at least in terms of self respect. I guess for certain people it does not matter how they earn money, be it through fraud or honest work. But I don't think I would be happier if I was a fraudulent multi-millionaire.

KorfmannArno 6y ago
I'd definitely be happier being a fraudulent multi-millionaire.
- pas 6y ago
  How do you know?
  - Loughla 6y ago
    With enough money, I'm like 99% sure I could put some fraud to bed in my conscience. From what I can tell, success tends to help people justify their actions in hindsight. So maybe there's something psychological there to help me forget, anyway. If nothing else, as a billionaire, I could afford to do extremely good works to help people forget about how awful I was in the early days (remember when Bill Gates was the devil? I do).
    - pas 6y ago
      Thanks for the reply! Yeah, I vividly remember how people were constantly reminding each others about the evils of M$ and Gates. But even his ruthlessness wasn't fraud, right? Usually enterprise software simply stifles software engineering because of the very short-term oriented for-profit approach. Which leads to burnout, but ... still not exactly fraud.
      - mongol 6y ago
        Agreed, I don't think Gates can be descibed as fraudulent. He was like you say a ruthless businessman. But that is different than what this Nikola founder seems to have been.

ActorNightly 6y ago

>How was it able to go public? Plenty of people talk about the cancer present in VC culture. Engineering doesn't matter as long as you can tell a good story.