What happened

Shares of electric-truck start-up Nikola (NASDAQ:NKLA) were down again on Monday, on continued selling pressure in the wake of a hard-hitting report from a short-seller last week. But a statement from Nikola challenging the report -- and a new note from a Wall Street analyst defending the company -- may have been mitigating that selling pressure early on Monday.

As of 10 a.m. EDT, Nikola's shares were down about 4.4% from Friday's closing price.

So what

Nikola's stock has been under pressure since last Thursday, when short-seller Hindenburg Research released a scathing report that accused Nikola of being "an intricate fraud built on dozens of lies." From Wednesday's close through Friday's, the stock lost about 24% of its value.

Auto investors expected the selling pressure to continue on Monday -- and in fact, the stock was down more than 10% in premarket trading early on. But the selling pressure eased after Nikola released a rebuttal of Hindenburg's allegations, and after JPMorgan analyst Paul Coster said Hindenburg's core criticism of Nikola was "misconceived." 

The Nikola One electric semi prototype.

A short-seller said that the Nikola One prototype wasn't drivable. Nikola's response: Maybe so, but that was a while ago and our later prototypes are fully functional. Image source: Nikola.

In his Monday morning note, Coster said that Hindenburg's report didn't undermine the three aspects of Nikola's strategy that he finds compelling:

  • Nikola's "closed-loop" hydrogen-based transportation solution, in which it will provide a refueling network for fleets operating its hydrogen fuel-cell trucks
  • The leasing model for its fuel-cell trucks
  • The "best-in-class" set of partnerships to deliver trucking solutions quickly and with minimal up-front investment

As Coster sees it, the third point "got a huge boost" with the announcement of Nikola's deal with General Motors (NYSE:GM) last week, in which GM will engineer and build Nikola's Badger pickup truck. 

The GM deal adds to previous partnership deals with heavy-truck maker CNH Industrial (NYSE:CNHI) and auto supplier Robert Bosch, showing that Nikola has the ability to execute by leveraging other companies' core competencies, Coster said, and is "a major positive, not a negative." 

Coster maintained his previous overweight rating on Nikola's shares. 

Now what

Nikola's own response was somewhat less cogently argued, but it's also important to consider. In a nutshell, the company said that most of Hindenburg's allegations relate to events before 2017 or so, and that much progress has been made since. 

My take is that there's a lot of smoke here, but what seems to be emerging is this: Nikola's early claims may have been overblown, but -- today -- the company is well on its way to becoming a real business. 

What's that worth? It's still hard to say, and I think auto investors should expect more volatility as the market tries to figure that out over the next several days.