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Trevor Milton, the founder and chairman of electric truck startup Nikola, has stepped down from his role following a short-seller’s allegations of fraud and deceptive statements.
After Hindenburg Research published a report accusing Milton of “numerous lies”‘ and calling Nikola an “intricate fraud,” both the Securities and Exchange Commission and the Department of Justice opened investigations into the company, sending Nikola’s stock price plummeting. (GM veteran Stephen Girsky will take over as executive chairman.)
It’s a head-snapping turn of fortune for Nikola, which recently signed a $2 billion deal with General Motors, and for Milton, who until early Monday morning was still riding high, after a years-long rise.
Milton founded Nikola in 2015 Salt Lake City, Utah, then moved the company to Phoenix, Arizona. He started off as CEO, with a resume that included an e-marketplace, a security and alarm company, and a startup for heavy trucks that would use compressed natural gas, according to the Wall Street Journal.
Nikola originally said it would build a 2,000-horsepower truck that would have six electric motors and a natural-gas turbine onboard as the generator, then in 2016 pivoted to hydrogen fuel cell-powered trucks, a zero-emission alternative to battery-powered electric vehicles like the Tesla Semi. Nikola said full production would start in 2020.
In February of this year, Nikola unveiled the Badger, a consumer-facing electric pickup truck that boasted a 600-mile range with the help of hydrogen power or a 300-mile range on just battery power. The next month, Milton went from CEO of Nikola to executive chairman, FleetOwner reported. Mark Russell assumed the chief executive role after being named the president of Nikola on February 26.
The C-suite shakeup preceded Nikola’s next coup: The startup went public on June 4 via a merger with VectoIQ, earning Milton a spot on Forbes’ 400 billionaires list, thanks to a net worth of more than $5 billion. A few days later, Nikola said it would open reservation books for the Badger that month. Its stock jumped 104% at the news, Business Insider reported. As promised, Badger reservations opened on June 29. Milton tweeted that the company would not use money from deposits to “fund [its] development.”
Then in August, Business Insider discovered that Nikola had made just $36,000 in revenue, and not from selling any trucks: The money came from installing solar panels that Milton himself had purchased.
Nikola’s financial future, though, seemed bright. On September 8, General Motors announced a $2 billion deal with Nikola to build cars using GM’s Ultium battery technology, fuel cell systems, and manufacturing knowledge. The Badger would be the first vehicle born from this partnership, entering production in 2022. The move caused Nikola shares to spike 53%.
Then, on September 10, short-seller Hindenburg Research published a lengthy report that called Nikola’s business an “intricate fraud” and specifically accused Milton of telling “numerous lies.” It claimed he was the mastermind behind various deceptive statements made at his past businesses before Nikola’s founding. Emails that Hindenburg said were sent by Milton, to potential investors, claimed a deal with his former company, dHybrid, was worth $250 million. In reality, it was worth just $16 million.
A Nikola spokesperson said the report was “filled with misinformation” that was designed to benefit Hindenburg’s short bet. Regardless, Nikola stock dropped 13%.
Milton threatened legal action against the short-seller, but the Securities and Exchange Commission opened an investigation last week, sending the company’s stock down another 6%. The next day, the Department of Justice joined in on the probe, knocking the stock yet another 7%.
GM stands by its decision to partner with Nikola, saying that it did its “appropriate diligence” before signing the deal.
It’s not clear how all of this will affect Nikola’s product launch timeline or what the SEC and DOJs’ investigations will yield. Regardless, September marked a rapid descent for Nikola. There’s no doubt that investor and employee morale is shaken right now. Girsky’s first role will likely be to soothe those anxieties.
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