(Award-winning tech columnist Jon Markman publishes of Strategic Advantage, a popular daily newsletter about the digital transformation of business, entertainment and society -- and how to invest in it. Click here for a free two-week trial.)

The analyst community is bullish on Nikola ( (NKLA) - Get Report), a company that plans to make hydrogen powered pickup and semi-trucks. Investors should be skeptical.

An analyst at JP Morgan defended Nikola last week as its shares lost 11%. The researcher joins Loop Capital in in the bull camp. Both firms expect hydrogen powered vehicles within 2 years.

That assessment is wildly optimistic yet that is the least of the problems at Nikola.

The share weakness today, amounting to -25%, is about the Badger, a joint venture with General Motors ( (GM) - Get Report) to build a hydrogen-electric pickup truck. In September GM planned to take a 2 million share equity position in Nikola and a contract to build Badgers. However managers announced Monday a non-binding memorandum of understanding for technology only applicable to semi-trucks. 

The press release does not mention any equity investment or Badger. JP Morgan analysts argued last week that dropping the Badger project may be a good thing. They see the initiative as nonessential. It could also drain resources needed to develop more important class 8 semi-trucks.

This is still rubbish. The oddity of the Badger partnership is that Nikola put up all of the money. Managers agreed to pay GM up to $700 million for technology and production. Also, according to GM press release, the Detroit-based automaker stands to claim as much as 80% of Nikola’s regulatory credits for green vehicles plus a $2 billion equity stake in the company.

The benefit to Nikola was access to GM’s technology and production capabilities. The credibility of working with the world’s biggest automaker was a plus, too.

Although Nikola shares zoomed from $11 in April to $95 through the middle of July, some investors have questioned the value of Nikola’s intellectual property. Others have probed the viability of hydrogen as fuel for long haul vehicles.

Cathy Wood, chief investment officer at Ark Investments laid out in July a damning case against hydrogen. Ark research showed the cost to build infrastructure for hydrogen refuelling stations would be 5x-10x more expensive than comparable infrastructure for electric vehicles. And the refueling cost for a trucker driving 750,000 miles would be 3x greater.

All of this is important because Nikola’s business plan involves including three years’ worth of refueling in the cost a long haul truck. Managers have never explained how Nikola plans to finance the infrastructure.

And it’s not the first time Nikola managers pitched an all-inclusive clean energy scheme.

Trevor Milton, the ex-chairman, started the company in 2016 by promising to launch natural gas powered vehicles with refuelling included. Neither the vehicles nor the stations ever materialized. Nikola simply moved on to making the same promises about hydrogen powered trucks.

Milton stepped down in September in a cloud of controversy. The Department of Justice announced a pending investigation for misleading statements. Also, a noted short seller alleged Nikola’s claims of cutting edge hydrogen technology is an intricate fraud. Some of the allegations were later confirmed in a report from the Financial Times.

It’s noteworthy that JP Morgan analysts have been bullish on Nikola since July. In a note to clients Paul Coster boosted his rating to “overweight” and set a price target of $45. The optimism was based on the likelihood of a partner to build Badger, and development of a hydrogen station in the United Kingdom, according to MarketWatch.

Shares bounced toward $60 before ultimately collapsing to $16 after Milton left the company.

The former chairman still has a big role to play. Starting Dec. 1 all of his 96.1 million shares will become unlocked. He will be free to sell his entire holdings on the open market or through a structured transfer. If he sells that would be a huge overhang of stock that will surely depress the share price.

Nikola has no earnings and trades as 80,000x sales. That’s not as terrible as it seems. There is nothing wrong with investing in stories. Some of these, like Tesla ( (TSLA) - Get Report) can be exceptional investments.

The problem with Nikola is the story has too many red flags. There is no market for hydrogen vehicles because electric propulsion offers better performance and economics. The full Trevor Milton saga has yet to play out.

Investors should use any future strength to sell Nikola. Barring something unforeseen the shares should decline toward $10.