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Nikola founder steps down amid deception claims, probe

Nikola founder Trevor Milton with a prototype of the Nikola Two fuel-cell powered big-rig hauler
Trevor Milton, founder of electric-truck company Nikola, with a prototype of the Nikola Two fuel-cell powered big rig hauler.
(Nikola)

Nikola Corp. faces an uncertain future following the sudden departure of its founder and chairman in the wake of regulatory investigations and a collapse of its stock price, even as partner General Motors Co. says it won’t abandon the electric-truck start-up.

Trevor Milton stepped down as executive chairman effective immediately and was replaced by Stephen Girsky, the former GM vice chairman who oversaw Nikola’s stock listing and helped broker their partnership. Nikola’s shares — already reeling from claims of deception leveled by short seller Hindenburg Research — dived 19.3% on Monday.

“Nikola is truly in my blood and always will be, and the focus should be on the company and its world-changing mission, not me,” Milton said in a statement. “So I made the difficult decision to approach the board and volunteer to step aside.”

The resignation marks a remarkable fall from grace for Milton, a 39-year-old college dropout whose fortune soared when he took Nikola public through a reverse merger in June. He agreed to relinquish stock units that as of Friday’s close were worth about $166 million and gave up his board seat at Nikola, which has yet to generate any meaningful revenue.

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The shake-up also raises questions about Nikola’s fate without its charismatic founder, who was the public face of the company and the architect of its key strategic projects. Analysts said Nikola had its work cut out for it to rebuild its credibility with Wall Street.

“Trevor stepping down voluntarily at Nikola will be perceived by the Street as a major near-term gut punch for the company’s lofty EV ambitions as he plays a key role strategically in driving the company’s vision,” Dan Ives, an analyst at Wedbush Securities with a “neutral” rating on the stock, said in a note to clients Monday.

Some viewed the reshuffling as a positive catalyst. Jeffrey Osborne, an analyst at Cowen & Co. with an “outperform” rating on Nikola, wrote in a research note that Milton’s resignation is an effort to minimize distractions rather than as an admission of any wrongdoing on the part of the company. “We would view this weakness as a buying opportunity, but acknowledge it may take a few days for the dust to settle,” he wrote.

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The worsening stock rout also is a blow to GM, which took an 11% equity stake in Nikola this month. Although GM Chief Executive Mary Barra obtained the holding by agreeing to help Nikola bring its Badger electric pickup to market and without spending any cash, she has had to defend her company’s due diligence on the deal.

GM said Monday that it would continue to finalize its deal with the start-up after Milton’s departure. Its shares fell 4.8%. “We will work with Nikola to close the transaction we announced nearly two weeks ago to seize the growth opportunities in broader markets with our Hydrotec fuel cell and Ultium battery systems, and to engineer and build the Nikola Badger,” it said in a statement.

Hindenburg Research, a firm that owns a short position in Nikola’s stock and stands to gain from a decline in the share price, said Sept. 10 that Nikola deceived investors about its business prospects — claims that are now the subject of inquiries by the U.S. Securities and Exchange Commission and, reportedly, the Justice Department. In a statement released on Twitter, Milton vowed to defend himself against “false allegations” made by “outside detractors” he didn’t identify. (Milton has since set his Twitter account to private.)

Hindenburg said Monday that Milton’s resignation was not enough to salvage the company. “We believe this is only the beginning of Nikola’s unraveling,” it said in a statement. “General Motors should carefully evaluate the potential long-term damage to its 112-year brand by continuing to tie itself to Nikola.”

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Nikola’s stock soared after the Phoenix company went public following a reverse merger with a special-purpose acquisition company run by Girsky, 58, in early June. The listing coincided with an exuberant run for shares of Tesla Inc., which is also working on an electric semi truck. Nikola is working on models powered by both batteries and fuel cells and is planning a hydrogen refueling network.

At its closing-price peak of $79.73 on June 9, Nikola’s market capitalization was $28.8 billion and at times surpassed Ford Motor Co.’s valuation. Milton — who owns 35% of the company, according to regulatory filings — was worth $9 billion within days of the listing, according to the Bloomberg Billionaires Index. His fortune shrank to $4 billion before Monday’s stock plunge.

The stock tumbled after Hindenburg questioned the validity of Nikola’s claims about its technology, accusing Nikola of being “an intricate fraud built on dozens of lies.” Milton called Hindenburg’s report a “hit job” on Twitter and posted videos on Instagram — including one laden with expletives — dismissing Hindenburg’s accusations.

Nikola issued a more detailed statement four days after Hindenburg’s report on Sept. 14, though some of the company’s responses were more counterarguments than rebuttals. In addition to making other claims, the short seller said it corroborated a June report by Bloomberg News that said Milton had exaggerated the capabilities of the company’s debut truck, Nikola One.

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Milton, like Tesla Inc. Chief Executive Elon Musk, has relied on social media to promote his company. In February, he introduced the Badger truck via a tweet, calling it “the most advanced electric & hydrogen pickup, designed to take down the Ford Raptor.” On June 8, he tweeted that Nikola would start taking Badger reservations later in the month for “the most bad a— zero emission truck.” Potential buyers paid deposits as high as $5,000 — without even seeing a prototype of a vehicle that won’t go on sale until 2022.

Investors have sometimes struggled to keep up with Milton’s messages, especially given the evolving list of projects Nikola is pursuing: battery-electric big rigs in Europe, fuel-cell-powered semis in the U.S., an electric pickup to be built by GM, and becoming the preeminent supplier of hydrogen for fleets of vehicles.

“It’s a bit confusing trying to follow Trevor on his various social-media outlets about the timing and cadence of communication of the different variables that you’re talking about,” Cowen analyst Osborne told executives during Nikola’s first earnings call on Aug. 4.

Nikola has had a co-development agreement with Germany’s Robert Bosch since 2017 to develop key components including fuel cells, motors and battery packs. It plans to build a battery electric semi truck with CNH Industrial’s Iveco at a facility in Ulm, Germany, by the end of next year. A fuel-cell-powered semi truck is planned for 2023 that will be built at Nikola’s factory in Coolidge, Ariz. GM plans to provide the fuel cells and battery packs.


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