Not Just SEC, Justice Department Too Probing Short Seller Allegations Against Nikola: Report

Short seller allegations against Nikola Corporation NKLA have caught the eye of the United States Department of Justice, the Financial Times reported Tuesday.

What Happened: The inquiry into the electric vehicle startup is being handled by the U.S. Attorney’s Office for the Southern District of New York, which is interested in the report containing the allegations made by Hindenburg Research, according to FT.

The Justice Department conferred with people on the contents of the report, unnamed sources told FT.

The Trevor Milton-led company is also the subject of a separate inquiry by the U.S. Securities and Exchange Commission, which is assessing whether the automaker deceived investors about its business prospects, according to Bloomberg.

Nikola shares have lost 40% since last Thursday, the day the allegations were made.

Why It Matters: The EV startup signed a $2 billion partnership with General Motors Company GM last week, forging a decade-long partnership and gave the latter 11% stake in Nikola. 

GM defended the tie-up, with CEO Mary Barra claiming appropriate due diligence was conducted ahead of the tie-up.

Nikola has issued a detailed rebuttal to the allegations made against it, saying, it believed that Hindenburg published the report shortly after the announcement of the GM deal so as to financially benefit short sellers. 

The automaker said it contacted and briefed the SEC and asked it to look into false and misleading claims made by Hindenburg.

Price Action: Nikola shares closed nearly 8.3% lower at $32.83 on Tuesday and fell almost 5.5% in the after-hours session to $31.03.

Photo courtesy: Nikola Corp.