What's going on?

Nikola reportedly faces an investigation after a major activist investor accused the electric truckmaker of being too good to be true.

What does this mean?

Nikola hit most people�s radars for the first time in June, when its surging stock pushed its valuation above carmaking veteran Ford � even though it, uh, hadn�t actually produced a single vehicle commercially. It gained another burst of publicity just last week after announcing a $2 billion deal with General Motors.

But now � in a story that�s been building for a few days � the activist investor Hindenburg Research has accused Nikola of dozens of transgressions, like overstating the abilities of its early prototype trucks. That didn�t go down well with the truckmaker, which asked a major US regulator�to investigate Hindenburg. And that didn�t go down well with the regulator, which reportedly turned its attention to Nikola�s operations instead�

Why should I care?

For markets: Angels or devils?�

Activist �short-sellers� like Hindenburg openly aim to profit by placing bets that a company�s stock will fall, and then publishing details of its supposedly shifty dealings. This high-risk strategy pays off if the world takes their side, but it can also backfire if the company proves them wrong. Little surprise, then, that opinion is split on them: some see them as parasites driving healthy companies into the ground, while others see their work as an essential function of capitalism.

The bigger picture: Whoopsy daisy.�

The hype-filled world of electric vehicles � where often-unproven tech vies to grab a slice of a lucrative market � draws short-sellers like moths to a flame. Around 7% of Tesla’s stock is on loan to short-sellers, who sell the borrowed stock and hope to buy it back cheaper in future. If they�re wrong, of course, they might suddenly be forced to cut their losses and buy the stock prematurely � in turn causing the price they hoped would fall to rise.