Nikola, The Intellectual Child Of Tesla

Jul. 07, 2020 10:21 AM ETNikola Corporation (NKLA)WOR, TSLA67 Comments
Andrew Walker profile picture
Andrew Walker


  • The most common question to my article yesterday: tell me more about Nikola.
  • Nikola is the intellectual child of Tesla in every way.
  • While NKLA's stock is almost certainly a bubble, there's a good possibility the bubble runs longer than any bear imagines.

Yesterday, I posted "A more worthy play on Nikola's craziness". The basics of the article were that Worthington (WOR) had made an incredible venture investment into Nikola (NASDAQ:NKLA), and that the market was ignoring the ~$1B in mark to market value that WOR had generated.

I also mentioned that I thought Nikola's stock was a bubble, and while the company would almost certainly never live up to its current valuation, bubbles can go on for a lot longer than many investors expect. Given that, I thought there was a good chance WOR would be able to exit their NKLA investment at prices approaching or perhaps exceeding today's levels.

By far the most common question I got in response to the article was for more on my views on Nikola, so I figured I'd do a follow up post diving a little deeper into Nikola.

To start, it’s impossible to talk about NKLA without discussing with their intellectual father, Tesla.

I’ll admit I’ve long been a Tesla skeptic, so much so that the last time I read Smartest Guys in the Room (the Enron book), I tweeted and posted on all of the similarities between Enron and Tesla (I saw some similarities between the Match King and Tesla too). While there’s no doubt the car is great, Tesla checked roughly every box for (at best) a promote and (at worst) a fraud I’ve ever seen.

However, I haven’t simply been a Tesla skeptic because of the (many) red flags surrounding the company. I’ve also been a skeptic because high valuations tend to attract competition. With Tesla’s valuation exceeding traditional automakers magnitudes of its size (in terms of cars sold), the capital markets was screaming to investors and entrepreneurs “we want to put money into this sector. Give us something to put money into and we will fund it.” That type of

This article was written by

Andrew Walker profile picture
Andrew Walker is a portfolio manager at Rangeley Capital LLC with a focus on small cap special situations investments. He's also the founder of and the Yet Another Value podcast

Disclosure: I am/we are long WOR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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