Volatility in Nikola Corporation (NASDAQ: NKLA) continued on Tuesday following reports that the SEC is investigating the company in response to allegations by Hindenburg Research that Nikola is an “intricate fraud.”
On Monday, S3 Partners analyst Ihor Dusaniwsky said volatility could get ramped up a notch if Nikola experiences a short squeeze in the near future.
Extreme Volatility: Nikola shares jumped 11% on Monday after the company denied the allegations and General Motors Company (NYSE: GM) CEO Mary Barra said the company had a “very capable” team vet Nikola prior to their new partnership.
Nikola shares have been all over the map in the past week, initially jumping as high as $54.56 when the GM deal was announced and then dropping below $30 in the days following the release of the Hindenburg report. Short sellers have made a killing on the fraud allegations up to this point, but Dusaniwsky said Monday the Nikola short-seller party could soon come to an abrupt end.
Nikola currently has $327.5 million in short interest, or about 7.5% of the stock’s float. That short interest has increased by 1.3 million shares in the past week.
That short interest is relatively modest compared to other auto stocks, and Dusaniwsky said Monday the majority of the trading since the GM news came out has come from existing longs selling their stakes and new longs swooping in to buy the dip.
No Shares To Borrow: Short sellers looking to bet against Nikola following the fraud allegations are running into a big problem — lack of loan availability.
“Because non-insider NKLA holders are predominantly retail based who are not active lenders of stock nor in margin accounts and there are not many institutional or hedge fund holders who actively lend stock or whose stock is rehypothicated and lent out, the overall lendable supply of NKLA stock is very small,” Dusaniwsky said.
On Monday, new Nikola short sellers were paying borrow fees in the 25% to 30% range, according to S3.
At this point, Nikola short sellers have endured $229 million in mark-to-market losses in 2020, but they were up $58 million in profits for the month of September as of Monday’s close.
“We will probably see a short squeeze in NKLA very soon if its stock price continues to shrug off bad news and climb on good news, but at the moment the short squeeze is just sitting at the top of the hill and building up potential energy,” Dusaniwsky said.
Benzinga’s Take: The combination of extreme headlines and potential short squeeze suggests Nikola will continue to be extremely volatile and unpredictable in the near term. Long-term investors should consider staying on the sidelines for at least a week or two to let the dust settle on what has been an extremely chaotic week for the company.
Nikola Sell-Off Accelerates Following Milton’s Response To Hindenburg Report
Nikola Short Sellers Pocket M On Hindenburg Sell-Off
Latest Ratings for NKLA
|Sep 2020||RBC Capital||Maintains||Sector Perform|
|Aug 2020||Wedbush||Initiates Coverage On||Neutral|
|Aug 2020||Wedbush||Initiates Coverage On||Neutral|
View More Analyst Ratings for NKLA
View the Latest Analyst Ratings
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© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
George Conway predicts Trump will wind up “bankrupt” and a “criminal defendant”
George Conway and Donald Trump Getty Images/Salon
George Conway, the husband of former White House counselor Kellyanne Conway, took to Twitter on Tuesday morning to deliver a brutal prediction about President Donald Trump’s future.
Reacting to The New York Times’ explosive reporting about the contents of the president’s taxes, Conway predicted that the full tax returns themselves will likely be leaked to other reporters, who will post them in their entirety for the public to see.
It’s at that point, Conway believes, that accounting experts will take a deep dive into the president’s finances and raise more questions about his sources of income — and that, in turn, will make him toxic for any financial institutions who were still thinking of lending him money.
“He’ll end up personally bankrupt,” Conway predicted. “He’ll wind up a criminal defendant, fighting off charges of tax and financial fraud, and he might not be even able to foot his lawyers’ bills, if any decent lawyers will still work for him.”
The bottom line, writes Conway, is that “he’s done . . . not just politically, but financially and legally.”
‘Fantastic Beasts’ star Eddie Redmayne calls ‘vitriol’ aimed at J.K. Rowling ‘absolutely disgusting’
Eddie Redmayne has said that the targeting of J.K. Rowling over her comments on transgender issues has been “absolutely disgusting.”
Redmayne, who plays stars in the Rowling-penned Fantastic Beasts movies, said that he does not agree with her stance, but was alarmed at the “vitriol” that has been directed at the author, and has addressed it in a “personal note” to her.
He added that the insults hurled at transgender people on social media are “equally disgusting.”
Speaking to the Daily Mail, Redmayne said that he has “trans friends and colleagues” who are “having their human rights challenged around the world and facing discrimination on a daily basis.”
He went on: “Similarly, there continues to be a hideous torrent of abuse towards trans people online and out in the world that is devastating.”
Famously, Redmayne starred in The Danish Girl in 2015, a biopic of the pioneering transgender artist Lili Elbe.
Rowling has received backlash after taking issue with an online article which described “people who menstruate.”
The Harry Potter writer noted that the word “women’“appeared to be missing, but objections were then raised over the fact that those transitioning can still menstruate.
Following the backlash, she penned a long essay defending her right to discuss issues of gender and sexuality as a survivor of sexual assault and abuse.
However, the controversy resurfaced after it emerged that her new novel, part of her Cormoran Strike series and written under her Robert Galbraith pseudonym, contained reference to a male character who murders while dressed as a woman.
Over the weekend, a large group of actors and writers, including the likes of authors Ian McEwan and Lionel Shriver and actors Griff Rhys Jones and Frances Barber, signed an open letter in support of Rowling published in the Sunday Times.
It objected to the “hate speech” directed at Rowling “in the hope that, if more people stand up against the targeting of women online, we might at least make it less acceptable to engage in it or profit from it.”
“I’m profoundly grateful to all the signatories, not only on a personal level, (though believe me, I’m EXTREMELY grateful on that level), but because the signatories are showing solidarity with all the women who’re currently speaking up for their own rights and facing threats of violence and even death in return,” Rowling said in her response on Twitter.
Read more from Yahoo Entertainment:
JPMorgan Admits 15 Traders Were Behind $300 Million Spoof Losses
(Bloomberg) — JPMorgan Chase & Co. admitted wrongdoing and agreed to pay more than $920 million to resolve U.S. authorities’ claims of market manipulation involving two of the bank’s trading desks, the largest sanction ever tied to the illegal practice known as spoofing.
Over eight years, 15 traders at the biggest U.S. bank caused losses of more than $300 million to other participants in precious metals and Treasury markets, according to court filings on Tuesday. JPMorgan admitted responsibility for the traders’ actions. The Justice Department filed two counts of wire fraud against the bank’s parent company but agreed to defer prosecution related to the charges, under a three-year deal that requires the bank to report its remediation and compliance efforts to the government.
The New York-based lender will pay the biggest monetary penalty ever imposed by the Commodity Futures Trading Commission, including a $436.4 million fine, $311.7 million in restitution and more than $172 million in disgorgement, according to a CFTC statement. The CFTC said its order will recognize and offset restitution and disgorgement payments made to the Department of Justice and Securities and Exchange Commission.
Allegations of spoofing on the bank’s precious metals desk emerged more than a year ago, in charges against several traders on the desk. But the settlement announced Tuesday also includes new allegations about spoofing by traders on the bank’s Treasurys desk.
The deal faults the bank for nearly eight years of manipulating prices of Treasury contracts, as well as trading in notes and bonds in the secondary market, that caused $106 million in losses. The government said five now-former JPMorgan traders executed thousands of deceptive trades. None of those traders have been charged publicly.
The accord also ends the criminal investigation of the bank that led to a half dozen employees being charged for allegedly rigging the price of gold and silver futures from 2008 to 2016. Two have entered guilty pleas, and three traders and a former JPMorgan salesman are awaiting trial. In all, according to the settlement deal, 10 JPMorgan traders caused losses of $206 million to other parties in the market.
Read More: Inside the JPMorgan Trading Desk the U.S. Called a Crime Ring
“For nearly a decade, a significant number of JPMorgan traders and sales personnel openly disregarded U.S. laws that serve to protect against illegal activity in the marketplace,” said Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office.
JPMorgan, in a statement, said it doesn’t expect any disruption of service to clients as a result of the resolutions.
“The conduct of the individuals referenced in today’s resolutions is unacceptable and they are no longer with the firm,” said Daniel Pinto, a co-president of JPMorgan. “We appreciate that the considerable resources we’ve dedicated to internal controls was recognized by the DOJ, including enhancements to compliance policies, surveillance systems and training programs.”
The JPMorgan penalty far exceeds previous spoofing-related fines levied against banks, and is the toughest sanction imposed in the Justice Department’s years-long crackdown on spoofing.
Spoofing typically involves flooding derivatives markets with orders that traders don’t intend to execute to trick others into moving prices in a desired direction. The practice has become a focus for prosecutors and regulators in recent years after lawmakers specifically prohibited it in 2010. While submitting and canceling orders isn’t illegal, it is unlawful as part of a strategy intended to dupe other traders.
Read More: Spoofing Is a Silly Name for Serious Market Rigging: QuickTake
More than two dozen individuals and firms have been sanctioned by the Justice Department or the CFTC, including day traders operating out of their bedrooms, sophisticated high-frequency trading shops and big banks such as Bank of America Corp. and Deutsche Bank AG.
The Justice Department took a much more aggressive tack with JPMorgan by alleging that the bank hosted an eight-year market manipulation conspiracy with its precious metals desk as a criminal racketeering operation.
While other suspected market cheats have been charged with specific spoofing and manipulation offenses, the Justice Department accused JPMorgan metals traders under the 1970 Racketeer Influenced and Corrupt Organizations Act — a criminal law more commonly applied to Mafia cases than global bank probes.
RICO allows for prosecutors to charge multiple criminal acts involving a group of people in the same case as long as they were part of the same enterprise. The Justice Department said the conspiracy on the JPMorgan metals desk ran from March 2008 to August 2016. The two former metals traders for the bank who have pleaded guilty to fraud charges are cooperating with authorities.
The highest-level individual charged is Michael Nowak, a veteran gold trader who remained active as the global head of JPMorgan’s precious metals desk until he was indicted under seal in August 2019 along with two others. A former JPMorgan salesman who worked with hedge fund clients was later added to the case.
In 2015, JPMorgan pleaded guilty to felony antitrust charges along with several other global banks that paid penalties and admitted to conspiring to rig the price of U.S. dollars and euros. The bank agreed to pay $550 million, but it and other global lenders in the accord felt little lasting hit from markets or customers, undercutting investor fears that a guilty plea would devastate their business.
Shortly after Nowak and other traders were charged under RICO, JPMorgan learned it was the focus of a separate but related criminal investigation into trading of Treasury securities and futures, according to a person familiar with the matter.
(Updates with estimated losses and other details from Justice Department settlement)
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