89-494: Nikola Corporation (formerly known as Nikola Motor Company ) is an American manufacturer of heavy-duty commercial battery-electric vehicles, fuel-cell electric vehicles, and energy solutions. It presented several concept vehicles from 2016 to 2020, the first of which was a natural gas fueled turbine-electric semi truck . The company went public on June 4, 2020. In February 2022, the company projected deliveries of between 300 and 500 of its first battery-electric semitrucks — known as
178-487: A United States federal grand jury indicted Nikola founder and former CEO Trevor Milton , but did not indict the company. The indictment charged Milton with three counts of criminal fraud —for "lying about 'nearly all aspects of the business'"—and two counts of securities fraud . Publicly traded shares in Nikola dropped to around US$ 12 after falling from over $ 65 in mid-2020, when its market valuation had exceeded that of
267-405: A bond ) and quickly selling it. The short seller must later buy the same amount of the asset to return it to the lender. If the market value of the asset has fallen in the meantime, the short seller will have made a profit equal to the difference. Conversely, if the price has risen then the short seller will bear a loss. The short seller usually must pay a handling fee to borrow the asset (charged at
356-493: A custodian or investment management firm, often lend out these securities to gain extra income, a process known as securities lending . The lender receives a fee for this service. Similarly, retail investors can sometimes make an extra fee when their broker wants to borrow their securities. This is only possible when the investor has full title of the security, so it cannot be used as collateral for margin buying . Time delayed short interest data (for legally shorted shares)
445-534: A 389-acre parcel of land in Coolidge, Arizona , for $ 23 million, with future state and local tax breaks. Nikola said in 2019 that they expected truck factory construction to start in 2020, truck construction in 2021, and the fabrication of 35–50,000 trucks per year by 2023. In February 2019, Mark Russell was hired as company president. Russell had most recently been president and CEO of Nikola Corporation's investor, Worthington Industries . In April 2019, Nikola held
534-431: A buyer and seller. Each trade results in a "long" (buyer's position) and a "short" (seller's position). When trading futures contracts , being 'short' means having the legal obligation to deliver something at the expiration of the contract, although the holder of the short position may alternately buy back the contract prior to expiration instead of making delivery. Short futures transactions are often used by producers of
623-455: A commodity to fix the future price of goods they have not yet produced. Shorting a futures contract is sometimes also used by those holding the underlying asset (i.e. those with a long position) as a temporary hedge against price declines. Shorting futures may also be used for speculative trades, in which case the investor is looking to profit from any decline in the price of the futures contract prior to expiration. An investor can also purchase
712-414: A compilation eight days later. Some market data providers (like Data Explorers and SunGard Financial Systems ) believe that stock lending data provides a good proxy for short interest levels (excluding any naked short interest). SunGard provides daily data on short interest by tracking the proxy variables based on borrowing and lending data it collects. Days to Cover (DTC) is the relationship between
801-415: A decrease in the price of a security, a short seller can borrow the security and sell it, expecting that it will be cheaper to repurchase in the future. When the seller decides that the time is right (or when the lender recalls the securities), the seller buys the same number of equivalent securities and returns them to the lender. The act of buying back the securities that were sold short is called covering
890-477: A locate. More stringent rules were put in place in September 2008, ostensibly to prevent the practice from exacerbating market declines. These rules were made permanent in 2009. When a broker facilitates the delivery of a client's short sale, the client is charged a fee for this service, usually a standard commission similar to that of purchasing a similar security. If the short position begins to move against
979-413: A particular rate over time, similar to an interest payment ) and reimburse the lender for any cash return (such as a dividend ) that was paid on the asset while borrowed. A short position can also be created through a futures contract , forward contract , or option contract , by which the short seller assumes an obligation or right to sell an asset at a future date at a price stated in the contract. If
SECTION 10
#17327972373881068-539: A partnership, by which GM would acquire an 11% stake in Nikola (valued at approximately $ 2 billion at the time of the announcement). GM would also earn the right to nominate one member to Nikola's board. In return, GM agreed to use its manufacturing facilities to begin production of the Badger, as well as supply fuel cells and batteries to Nikola globally. Nikola stock jumped by 50% after the announcement. On September 10, 2020, short seller firm Hindenburg Research released
1157-474: A provisional purchase order for up to 800 leases of the hydrogen-powered truck versions, and Nikola claimed then that the trucks would start being delivered in 2020. By 2019, total pre-orders for truck leases encompassing all Nikola Class 8 truck models were claimed to be worth $ 14 billion. The Nikola Two is a semi-tractor truck concept designed to be technically identical to the Nikola One. Unlike
1246-602: A range of 310 to 750 miles (500 to 1,200 km). Former CEO Trevor Milton stated in 2018 that production was planned to begin at the same time as the US truck versions, which was then thought to be 2022–2023. In November 2019, the company unveiled a Nikola Tre electric truck concept (a rebadged version of the Iveco S-Way ) that would also be aimed at the European market, just as the original hydrogen Tre had been. In July 2021,
1335-613: A report accusing Nikola of being "an intricate fraud" perpetrated largely by Milton. Further verification by Financial Times and Research Enquirer confirmed the report's claim regarding a showcased Nikola One rolling down a gradual slope with no onboard propulsion and instead by using the force of gravity. The stock fell by 10% that day while the stock of GM, which had made an agreement with Nikola days earlier, fell by 4%. By September 12, Nikola stock had fallen by 36%. Nikola called these claims "false and misleading" and threatened legal action against Hindenburg. The US Attorney's Office for
1424-485: A revenue of $ 18.1 million. In September 2022, all 93 of its Tre Class 8 battery-electric vehicles were recalled due to an issue with seat belt anchor assemblies. Nikola published in October 2022 that they had completed the acquisition of Romeo and "look forward to executing on the opportunities ahead." In June 2023, a Nikola truck caught fire at its headquarters due to a coolant leak inside its battery pack. In August 2023,
1513-448: A rise in the price of an instrument that appears undervalued. Alternatively, traders or fund managers may use offsetting short positions to hedge certain risks that exist in a long position or a portfolio. Research indicates that banning short selling is ineffective and has negative effects on markets. Nevertheless, short selling is subject to criticism and periodically faces hostility from society and policymakers. To profit from
1602-584: A second truck's battery pack malfunctioned, which led the company to announce a recall of all the battery-electric semitrucks it had made to that point (209 in total). It suspended sales of its battery-electric trucks until a repair would become available. On September 4, 2023 a third truck caught fire at Arizona Lithium in Tempe, Arizona, and on September 8, a fourth truck fire occurred near Nikola's headquarters in Phoenix. Nikola sold 112 hydrogen fuel cell trucks in
1691-425: A short position. When a security's ex-dividend date passes, the dividend is deducted from the shortholder's account and paid to the person from whom the stock is borrowed. For some brokers, the short seller may not earn interest on the proceeds of the short sale or use it to reduce outstanding margin debt. These brokers may not pass this benefit on to the retail client unless the client is very large. The interest
1780-464: A start-up company could backfire since it could be taken over at a price higher than the price at which speculators shorted; short-sellers were forced to cover their positions at acquisition prices, while in many cases the firm often overpaid for the start-up. During the 2008 financial crisis , critics argued that investors taking large short positions in struggling financial firms like Lehman Brothers , HBOS and Morgan Stanley created instability in
1869-422: A working drivetrain and accessories. The state of most concept cars lies somewhere in between and does not represent the final product. A very small proportion of concept cars are functional to any useful extent, and some cannot move safely at speeds above 10 miles per hour (16 km/h). Inoperative " mock-ups " are usually made of wax, clay, metal, fiberglass, plastic, or a combination thereof. If drivable,
SECTION 20
#17327972373881958-527: Is available in a number of countries, including the US, the UK, Hong Kong, and Spain. The number of stocks being shorted on a global basis has increased in recent years for various structural reasons (e.g., the growth of 130/30 type strategies, short or bear ETFs). The data is typically delayed; for example, the NASDAQ requires its broker-dealer member firms to report data on the 15th of each month, and then publishes
2047-639: Is detected by the Depository Trust & Clearing Corporation (in the US) as a " failure to deliver " or simply "fail." While many fails are settled in a short time, some have been allowed to linger in the system. In the US, arranging to borrow a security before a short sale is called a locate . In 2005, to prevent widespread failure to deliver securities, the U.S. Securities and Exchange Commission (SEC) put in place Regulation SHO , intended to prevent speculators from selling some stocks short before doing
2136-419: Is often split with the lender of the security. Where shares have been shorted and the company that issues the shares distributes a dividend, the question arises as to who receives the dividend. The new buyer of the shares, who is the holder of record and holds the shares outright, receives the dividend from the company. However, the lender, who may hold its shares in a margin account with a prime broker and
2225-402: Is sold, the seller is contractually obliged to deliver it to the buyer. If a seller sells a security short without owning it first, the seller must borrow the security from a third party to fulfill its obligation. Otherwise, the seller fails to deliver, the transaction does not settle , and the seller may be subject to a claim from its counterparty . Certain large holders of securities, such as
2314-418: Is the opposite of the more common long position , where the investor will profit if the market value of the asset rises. An investor that sells an asset short is, as to that asset, a short seller . There are a number of ways of achieving a short position. The most basic is physical selling short or short-selling , by which the short seller borrows an asset (often a security such as a share of stock or
2403-426: Is unlikely to be aware that these particular shares are being lent out for shorting, also expects to receive a dividend. The short seller therefore pays the lender an amount equal to the dividend to compensate—though technically, as this payment does not come from the company, it is not a dividend. The short seller is therefore said to be short the dividend . A similar issue comes up with the voting rights attached to
2492-486: The Depression . A few years later, in 1949, Alfred Winslow Jones founded a fund (that was unregulated) that bought stocks while selling other stocks short, hence hedging some of the market risk , and the hedge fund was born. Negative news, such as litigation against a company, may also entice professional traders to sell the stock short in hope of the stock price going down. During the dot-com bubble , shorting
2581-667: The Ford Motor Company . In October 2022, Milton was found guilty in federal court of three of four counts of fraud against him, over statements he made while CEO of the company. Nikola Corporation was founded by Trevor Milton in 2014 in Salt Lake City , Utah . As of 2016, the first 5,000 Nikola One hydrogen-powered glider trucks (truck vehicle platforms without engines) were slated to be built by Fitzgerald Glider Kits in Tennessee. In March 2019, Nikola acquired
2670-576: The NYSE or the NASDAQ typically report the "short interest" of a stock, which gives the number of shares that have been legally sold short as a percent of the total float . Alternatively, these can also be expressed as the short interest ratio , which is the number of shares legally sold short as a multiple of the average daily volume. These can be useful tools to spot trends in stock price movements but for them to be reliable, investors must also ascertain
2759-528: The Nikola One , aimed then to be in production in 2020. The concept was changed in August 2016 to a hydrogen fuel-cell powered generator instead of a natural gas fuelled gas-turbine generator. In 2016 Nikola claimed to have received $ 2.3 Billion in pre-sales, to date no deliveries have been made. In May 2018, Nikola Motor Company filed a lawsuit against Tesla, Inc. seeking $ 2 billion in damages alleging that
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2848-577: The Tesla Semi infringed on six patents that Nikola has been granted on the design of the Nikola One. Tesla responded that the lawsuit is without merit. In September 2019, the Patent Trial and Appeal Board denied Tesla's request to invalidate Nikola's side-door patent. Nikola’s suit prompted a countersuit by Tesla. As part of a settlement agreement, the two companies agreed to drop their suits against each other. In May 2018, Anheuser-Busch placed
2937-599: The United Kingdom , Germany , France , Italy and other European countries in 2008 to minimal effect. Australia moved to ban naked short selling entirely in September 2008. Germany placed a ban on naked short selling of certain euro zone securities in 2010. Spain, Portugal and Italy introduced short selling bans in 2011 and again in 2012. During the COVID-19 pandemic , shorting was severely restricted or temporarily banned, with European market watchdogs tightening
3026-429: The 11% stake in the company as well as no longer producing the Badger electric pickup truck for the company. The Badger was subsequently cancelled. In December 2020, Republic Services stated that their previously announced partnership with Nikola would be terminated. The two companies had agreed to jointly develop zero-emissions garbage trucks in August 2020, including the production of at least 2,500 to 5,000 trucks for
3115-576: The Midwest. In July 2021, the company announced plans to add five new Class 8 truck dealers in Arizona, Texas, Colorado, California, New Mexico, Delaware, Florida, Maryland and Virginia. In late July 2021, a United States federal grand jury returned an indictment against Trevor Milton that included three counts of criminal fraud , including "lying about 'nearly all aspects of the business'" and two counts of securities fraud . Milton pleaded not guilty to
3204-557: The Nikola One, a prototype driving under its own power was demonstrated in 2019, including when hauling a cargo of beer for a future customer. In November 2018, the company unveiled a Nikola Tre hydrogen-powered semi-truck concept aimed at the European market. The hydrogen ICE Tre was also stated to be targeted for the Australian and Asian markets. Nikola said the Tre concept was to have 500 to 1,000 horsepower (370 to 750 kW) and
3293-632: The Nikola Tre was made in April 2022, with 11 vehicles being delivered. In 2016, a prototype concept, the Nikola NZT (originally - and briefly - referred to as the Nikola Zero ) was unveiled as a utility task vehicle with a 72 or 107 kWh battery. The concept was stated to have 555 horsepower (414 kW) total, provided by a motor at each wheel, weigh 3,500 lb (1,600 kg), and use
3382-664: The Nikola Tre — to customers. The company delivered its first two battery-electric trucks in December 2021. Like Tesla, Inc. , the company is named in honor of Nikola Tesla , but these are not related to the inventor. Nikola Corporation is based in Phoenix, Arizona . In September 2020, the Securities and Exchange Commission and the Department of Justice launched investigations into securities fraud allegations. In July 2021,
3471-769: The Nikola World event in Scottsdale, Arizona . The two-day midweek event included a public demo day to show off the Nikola Two truck, the Nikola Tre truck, the Nikola NZT UTV, and the Nikola WAV watercraft. In March 2020, Nikola Corporation announced its plans to merge with VectoIQ Acquisition Corporation (ticker VTIQ), a publicly traded special-purpose acquisition company run by former General Motors (GM) vice-chairman and Stephen Girsky. This resulted in
3560-514: The Republic Services fleet by the start of 2023. Nikola's shares fell 9.8% after the announcement was released. Analysts call the cancelled order a short-term setback, allowing the company to channel more focus towards the core of the business, being the production of semi-trucks designed for long-haul transport. In February 2021, the company publicly dropped their Powersports unit along with any plans they previously had to produce any of
3649-566: The Securities and Exchange Commission had started a probe into the fraud allegations and on September 15, the Department of Justice began an investigation into Nikola as well. On September 21, 2020, Executive Chairman, founder and former CEO Trevor Milton announced his resignation from Nikola, and Stephen Girsky became non-executive chairman of the board. News of the allegations caused the share price of Nikola Corp to drop by 20%. Following
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3738-561: The Southern District of New York showed interest in the report. Previously, Milton had alleged that those who were short-selling Nikola stocks are fans of rival company Tesla and are "anti-Nikola or paid attack accounts". In response to the release of the Hindenburg report, Mary Barra , CEO of GM, said her company conducted appropriate diligence before its deal with Nikola. Reports that became public on September 14 stated that
3827-553: The U.S., the seller must arrange for a broker-dealer to confirm that it can deliver the shorted securities. This is referred to as a locate . Brokers have a variety of means to borrow stocks to facilitate locates and make good on delivery of the shorted security. The vast majority of stocks borrowed by U.S. brokers come from loans made by the leading custody banks and fund management companies (see list below). Institutions often lend out their shares to earn extra money on their investments. These institutional loans are usually arranged by
3916-474: The US.) This means that the buyer of such a short is buying the short-seller's promise to deliver a share, rather than buying the share itself. The short-seller's promise is known as a hypothecated share. When the holder of the underlying stock receives a dividend, the holder of the hypothecated share would receive an equal dividend from the short seller. Naked shorting has been made illegal except where allowed under limited circumstances by market makers . It
4005-540: The United States in 1929 and in 1940. Political fallout from the 1929 crash led Congress to enact a law banning short sellers from selling shares during a downtick; this was known as the uptick rule and was in effect until 3 July 2007, when it was removed by the Securities and Exchange Commission (SEC Release No. 34-55970). President Herbert Hoover condemned short sellers and even J. Edgar Hoover said he would investigate short sellers for their role in prolonging
4094-582: The accounts of their own customers. Typical margin account agreements give brokerage firms the right to borrow customer shares without notifying the customer. In general, brokerage accounts are only allowed to lend shares from accounts for which customers have debit balances , meaning they have borrowed from the account. SEC Rule 15c3-3 imposes such severe restrictions on the lending of shares from cash accounts or excess margin (fully paid for) shares from margin accounts that most brokerage firms do not bother except in rare circumstances. (These restrictions include that
4183-533: The asset in question in order to hedge their position. The practice of short selling was likely invented in 1609 by Dutch businessman Isaac Le Maire , a sizeable shareholder of the Dutch East India Company ( Vereenigde Oostindische Compagnie or VOC in Dutch). Short selling can exert downward pressure on the underlying stock, driving down the price of shares of that security. This, combined with
4272-609: The bicycle does not change and the same bicycle must be returned, not merely one that is the same model. Because the price of a share is theoretically unlimited, the potential losses of a short-seller are also theoretically unlimited. Shares in ACME Inc. currently trade at $ 10 per share . Shares in ACME Inc. currently trade at $ 10 per share. "Shorting" or "going short" (and sometimes also "short selling") also refer more broadly to any transaction used by an investor to profit from
4361-430: The broker must have the express permission of the customer and provide collateral or a letter of credit.) Most brokers allow retail customers to borrow shares to short a stock only if one of their own customers has purchased the stock on margin . Brokers go through the "locate" process outside their own firm to obtain borrowed shares from other brokers only for their large institutional customers. Stock exchanges such as
4450-637: The charges and was freed on $ 100 million bail, secured by two Utah properties. Nikola's share price dropped further and traded at $ 12 after falling from near $ 65 in June 2020, when Nikola had a company valuation in excess of the Ford Motor Company . Following the indictment of Milton in July 2021, the company stated "We remain committed to our previously announced milestones and timelines and are focused on delivering Nikola Tre battery-electric trucks later this year (fewer than 100 Tre vehicles, per 1Q2021 SEC filings) from
4539-489: The combined company being listed on the NASDAQ exchange with the NKLA ticker symbol. As part of the merger, founder and CEO Trevor Milton had his title changed from CEO to Executive Chairman and Nikola President Mark Russell became president and CEO. Nikola's stock began trading on June 4, 2020, a day after the merger was completed. By June 9, the shares had more than doubled since they began trading, as investors continued to bet on
SECTION 50
#17327972373884628-533: The company restated that they intend to deliver the first production Nikola Tre battery electric trucks later in 2021. The Tre was delivered to the Port of Los Angeles in December 2021. It has a 753 kWh battery pack, rechargeable from 10 to 80% in 120 minutes at 240 kW. California qualified the Tre for its HVIP program in January 2022 at up to $ 120,000, and New York at up to $ 185,000. The first customer delivery of
4717-451: The company's manufacturing facilities." In October 2022, Milton was found guilty in federal court of three of four counts of fraud against him, over statements he made while CEO of the company. On December 18, 2023, he was sentenced to four years in prison. In August 2022, Nikola announced that it would be acquiring the battery company Romeo Power. On August 4, 2022, it was reported that Nikola had delivered 48 vehicles to dealers, and reported
4806-957: The concept car, and did much to popularize it through its traveling Motorama shows of the 1950s. Concept cars never go into production directly. In modern times, all would have to undergo many changes before the design is finalized for the sake of practicality, safety , regulatory compliance , and cost. A "production-intent" prototype , as opposed to a concept vehicle, serves this purpose. Concept cars are often radical in engine or design . Some use non-traditional, exotic, or expensive materials, ranging from paper to carbon fiber to refined alloys . Others have unique layouts , such as gullwing doors , three or five (or more) wheels , or special abilities not usually found on cars. Because of these often impractical or unprofitable leanings, many concept cars never get past scale models or even drawings in computer design . Other more traditional concepts can be developed into fully drivable (operational) vehicles with
4895-421: The cost to borrow (short) Krispy Kreme stock reached an annualized 55%, indicating that a short seller would need to pay the lender more than half the price of the stock over the course of the year, essentially as interest for borrowing a stock in limited supply. This has important implications for derivatives pricing and strategy, for the borrow cost itself can become a significant convenience yield for holding
4984-419: The custodian who holds the securities for the institution. In an institutional stock loan, the borrower puts up cash collateral, typically 102% of the value of the stock. The cash collateral is then invested by the lender, who often rebates part of the interest to the borrower. The interest that is kept by the lender is the compensation to the lender for the stock loan. Brokerage firms can also borrow stocks from
5073-409: The deal and Nikola cancelled the truck. Concept car A concept car (also known as a concept vehicle or show vehicle ) is a car made to showcase new styling or new technology. Concept cars are often exhibited at motor shows to gauge customer reaction to new and radical designs which may or may not be produced . General Motors designer Harley Earl is generally credited with inventing
5162-403: The decline in price of a borrowed asset or financial instrument. Derivatives contracts that can be used in this way include futures , options , and swaps . These contracts are typically cash-settled, meaning that no buying or selling of the asset in question is actually involved in the contract, although typically one side of the contract will be a broker that will effect a back-to-back sale of
5251-402: The drivetrain is often borrowed from a production vehicle from the same company or may have defects and imperfections in design. They can also be quite refined, such as General Motors ' Cadillac Sixteen concept. Short (finance) In finance , being short in an asset means investing in such a way that the investor will profit if the market value of the asset falls. This
5340-402: The first half of 2024. Nikola’s expansion of its own hydrogen mobility, HYLA, establishing 14 refueling solutions by year-end. Nikola has publicly announced a number of vehicle design concepts since 2016 and unveiled a few concept vehicles that the company aims to develop for public sale. In 2016, the company unveiled a high-level design for a natural gas fuelled Class 8 truck called
5429-461: The growth potential of electric transportation. At the end of June, Nikola started taking reservations for pickup truck, the Badger, even though a prototype had not been shown to the public. The company was valued at around $ 13 billion in early August 2020, compared to its revenue in the first six months of 2020 of $ 80,000 ($ 36,000 of which was attributed to installation of solar facilities for CEO Milton). On September 8, 2020, Nikola and GM announced
SECTION 60
#17327972373885518-518: The holder of the short position (i.e., the price of the security begins to rise), money is removed from the holder's cash balance and moved to their margin balance . If short shares continue to rise in price, and the holder does not have sufficient funds in the cash account to cover the position, the holder begins to borrow on margin for this purpose, thereby accruing margin interest charges. These are computed and charged just as for any other margin debit. Therefore, only margin accounts can be used to open
5607-401: The number of shares brought into existence by naked shorters. Speculators are cautioned to remember that for every share that has been shorted (owned by a new owner), a 'shadow owner' exists (i.e., the original owner) who also is part of the universe of owners of that stock, i.e., despite having no voting rights, he has not relinquished his interest and some rights in that stock. When a security
5696-504: The number of shares in a given equity that has been legally short-sold and the number of days of typical trading that it would require to 'cover' all legal short positions outstanding. For example, if there are ten million shares of XYZ Inc. that are currently legally short-sold and the average daily volume of XYZ shares traded each day is one million, it would require ten days of average trading for all legal short positions to be covered (10 million / 1 million). Short Interest relates
5785-577: The number of shares in a given equity that have been legally shorted divided by the total shares outstanding for the company, usually expressed as a percent. For example, if there are ten million shares of XYZ Inc. that are currently legally short-sold, and the total number of shares issued by the company is one hundred million, the Short Interest is 10% (10 million / 100 million). If, however, shares are being created through naked short selling, "fails" data must be accessed to assess accurately
5874-404: The number of votes cast is greater than the number of shares issued by the company. Transactions in financial derivatives such as options and futures have the same name but have different overlaps, one notable overlap is having an equal "negative" amount in the position. However, the practice of a short position in derivatives is completely different. Derivatives are contracts between two parties,
5963-504: The original one, except it had doors (but still lacked a roof and a windshield). Nikola says it offered rides in this vehicle to the attendees during the event, and published a video claiming to show it. The vehicle was supposed to have 590 horsepower (440 kW), and up to 150 miles (240 km) of range per electric charge. The vehicle was cancelled, alongside the rest of the powersports division, in February 2021. The Nikola Reckless
6052-400: The other assets being sold short) are fungible . An investor therefore "borrows" securities in the same sense as one borrows a $ 10 bill, where the legal ownership of the money is transferred to the borrower and it can be freely disposed of, and different bank notes or coins can be returned to the lender. This can be contrasted with the sense in which one borrows a bicycle, where the ownership of
6141-484: The party that will benefit if the price falls will have a short position. Because a short seller can incur a liability to the lender if the price rises, and because a short sale is normally done through a stockbroker , a short seller is typically required to post margin to its broker as collateral to ensure that any such liabilities can be met, and to post additional margin if losses begin to accrue. For analogous reasons, short positions in derivatives also usually involve
6230-488: The posting of margin with the counterparty . Any failure to post margin promptly would prompt the broker or counterparty to close the position. Short selling is a common practice in public securities, futures, and currency markets that are fungible and reasonably liquid . A short sale may have a variety of objectives. Speculators may sell short hoping to realize a profit on an instrument that appears overvalued, just as long investors or speculators hope to profit from
6319-451: The powersports concept vehicles they had shown, including the Nikola WAV watersports vehicle. Also in February, as part of YE2020 filings with the SEC, the company stated that they now intended to produce just 50-100 Nikola Tre vehicles in 4Q2021. In June 2021, Nikola invested $ 50 million in a new hydrogen factory headed by Wabash Valley Resources to produce fuel for semi-truck fuel stations across
6408-415: The price of the asset falls below the contract price, the short seller can buy it at the lower market value and immediately sell it at the higher price specified in the contract. A short position can also be achieved through certain types of swap , such as a contract for difference . This is an agreements between two parties to pay each other the difference if the price of an asset rises or falls, under which
6497-551: The resignation, Nikola then "issued copyright-takedown notices targeting critics on YouTube who [citing fair use] used clips of the promotional video in which a Nikola One semi-truck was seen rolling down a hill" without a working drivetrain . The Drive called Nikola's action an "abuse of YouTube's copyright takedown system". On September 23, BP backed away from a potential partnership to develop hydrogen refueling stations for Nikola's EV Trucks; Nikola's stock price fell by more than 25% intraday after BP's statement. The partnership
6586-428: The rules on short selling "in an effort to stem the historic losses arising from the coronavirus pandemic". Worldwide, economic regulators seem inclined to restrict short selling to decrease potential downward price cascades. Investors continue to argue this only contributes to market inefficiency. A short seller typically borrows through a broker , who is usually holding the securities for another investor who owns
6675-593: The same 14.5 in (370 mm) clearance suspension as the Ford Raptor . By the end of 2016, it was listed as a powersports product, in the Nikola Powersports division. In 2017 Nikola took a journalist for a ride-along in a prototype of the car in a Utah desert to demonstrate the vehicle's capabilities. That was an open-cabin version, lacking doors or a windshield. On April 16, 2019, Nikola presented an NZT in Phoenix, Arizona, that appeared similar to
6764-511: The securities; the broker himself seldom purchases the securities to lend to the short seller. The lender does not lose the right to sell the securities while they have been lent, as the broker usually holds a large pool of such securities for a number of investors which, as such securities are fungible, can instead be transferred to any buyer. In most market conditions there is a ready supply of securities to be borrowed, held by pension funds, mutual funds and other investors. To sell stocks short in
6853-472: The seemingly complex and hard-to-follow tactics of the practice, has made short selling a historical target for criticism. At various times in history, governments have restricted or banned short selling. The London banking house of Neal, James, Fordyce and Down collapsed in June 1772, precipitating a major crisis that included the collapse of almost every private bank in Scotland, and a liquidity crisis in
6942-399: The short , covering the position or simply covering . A short position can be covered at any time before the securities are due to be returned. Once the position is covered, the short seller is not affected by subsequent rises or falls in the price of the securities, for it already holds the securities that it will return to the lender. The process relies on the fact that the securities (or
7031-399: The shorted shares. Unlike a dividend, voting rights cannot legally be synthesized and so the buyer of the shorted share, as the holder of record, controls the voting rights. The owner of a margin account from which the shares were lent agreed in advance to relinquish voting rights to shares during the period of any short sale. As noted earlier, victims of naked shorting sometimes report that
7120-409: The stock (similar to additional dividend ) – for instance, put–call parity relationships are broken and the early exercise feature of American call options on non-dividend paying stocks can become rational to exercise early , which otherwise would not be economical. A naked short sale occurs when a security is sold short without borrowing the security within a set time (for example, three days in
7209-407: The stock market and placed additional downward pressure on prices. In response, a number of countries introduced restrictive regulations on short-selling in 2008 and 2009. Naked short selling is the practice of short-selling a tradable asset without first borrowing the security or ensuring that the security can be borrowed – it was this practice that was commonly restricted. Investors argued that it
7298-595: The true level of short interest. Borrow cost is the fee paid to a securities lender for borrowing the stock or other security. The cost of borrowing the stock is usually negligible compared to fees paid and interest accrued on the margin account – in 2002, 91% of stocks could be shorted for less than a 1% fee per annum, generally lower than interest rates earned on the margin account. However, certain stocks become "hard to borrow" as stockholders willing to lend their stock become more difficult to locate. The cost of borrowing these stocks can become significant – in February 2001,
7387-487: The two major banking centres of the world, London and Amsterdam. The bank had been speculating by shorting East India Company stock on a massive scale, and apparently using customer deposits to cover losses. In another well-referenced example, George Soros became notorious for "breaking the Bank of England " on Black Wednesday of 1992, when he sold short more than $ 10 billion worth of pounds sterling . The term short
7476-475: The vehicle would have a 0.50-inch (12.7 mm) machine gun. The vehicle was removed from the website with the cancellation of the powersports division. The Nikola WAV was a concept vehicle unveiled in April 2019 as a Nikola Motors watersports offering and presented alongside the Nikola Zero. The Nikola WAV concept had a 12-inch (30 cm) waterproof 4K resolution screen, and cruise control. The vehicle
7565-627: Was a concept vehicle that was projected to be a military grade fully-electric tactical off-highway vehicle . A prototype of the vehicle was displayed in the International Special Operations Forces Industry Exhibition Conference in May 2018. The vehicle's chassis would be 4×4 although it could switch to two-wheel drive . It would weigh 2,299 pounds (1,043 kg) and would be able to carry up to 1,400 pounds (635 kg). Also,
7654-417: Was cancelled, alongside the entire powersports division, in February 2021. The Badger was a proposed electric pickup truck announced in February 2020. Nikola planned two variants, the first powered by a combination of hydrogen fuel cells and batteries and second all- electric , without fuel cells. The truck was intended to go to market in 2022 with the assistance of GM. In November 2020, GM pulled out of
7743-523: Was cited as a critical component in Nikola's business plan for its electric vehicle trucks powered by hydrogen fuel cells. Nikola had planned to announce the BP partnership days after the GM partnership. In November 2020, GM announced that the proposed deal to take an equity stake in Nikola would no longer occur. A revised deal was proposed, having GM provide Nikola with the promised fuel-cell technology, but leaving out
7832-503: Was in use from at least the mid-nineteenth century. It is commonly understood that the word "short" (i.e. 'lacking') is used because the short seller is in a deficit position with his brokerage house . Jacob Little , known as The Great Bear of Wall Street , began shorting stocks in the United States in 1822. Short sellers were blamed for the Wall Street Crash of 1929 . Regulations governing short selling were implemented in
7921-532: Was the weakness of financial institutions, not short-selling, that drove stocks to fall. In September 2008, the Securities Exchange Commission in the United States abruptly banned short sales, primarily in financial stocks, to protect companies under siege in the stock market. That ban expired several weeks later as regulators determined the ban was not stabilizing the price of stocks. Temporary short-selling bans were also introduced in
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