Disgraced Electric Car Company CEO Is Now Facing Federal Charges
Alex Healey
· 4 min read
Electric cars
are growing in popularity, with traditional automakers looking to increase their share of the emerging market. These companies are being forced to compete with major disruptors, like Tesla
, and specialist startups whose sole focus is EV tech.One such startup is Nikola Corporation, which began presenting zero-emission vehicle concepts back in 2016, and announced its stock would go public in March 2020. Everything seemed great until reports emerged accusing founder and CEO Trevor Milton of making false statements to inflate the share price.
Last week, a grand jury indicted Milton on three counts of fraud and accused him of "lying about nearly all aspects of the business." So what is going on? And what does this mean for Nikola?
What are the specifics of the case against Nikola?
Nikola went public on June 4, 2020, and early investors were impressed. After just five days on the stock exchange, Nikola’s valuation topped $31 billion. Trevor Milton, founder and CEO, held almost a quarter of the available shares.
As reported by
CNBC
, things started to go south last September, when short-seller Hindenburg Research published a report titled "Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America." The report was as damning as it sounds, accusing Milton of deliberately and repeatedly misleading investors.The 39-year old billionaire soon resigned as chairman, and an internal investigation confirmed he had been making inaccurate statements as early as 2016. Prosecutors framed these statements as an "attempt to enrich himself and elevate his stature as an entrepreneur."
The U.S. Attorney’s Office in Manhattan has now charged Milton with two counts of securities fraud, and wire fraud. The indictment says "Milton’s scheme targeted...retail investors...by making false and misleading statements...through social media, and television, print and podcast interviews."
The grand jury said that Milton should disgorge himself of all property "traceable to the commission of said offenses," including the billions he earned when Nikola began trading publicly.
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What do federal charges mean for Nikola?
As news of the federal indictment became public, Nikola’s stock price dropped to $12.03. This is down from an all-time high of $93.99. The share price has continued to tumble, and sits at just over $10 recently.
In response, Nikola released a statement emphasizing that the allegations are against Milton, and not the company itself. Nikola claims to have cooperated with the government throughout the investigation, and is "focused on delivering Nikola Tre battery-electric trucks later this year."
Milton has pleaded not guilty to the criminal charges. He has been released on a $100 million bond while awaiting trial, but is barred from contacting investors.
His legal team came out swinging, saying "Trevor Milton is innocent; this is a new low in the government’s efforts to criminalize lawful business conduct...Justice was not served by the government’s action today, but it will be when Mr. Milton is exonerated."
Despite the tough rhetoric of his defense team, law professor John Coffee explained to CNBC that it would be in Milton’s best interest to seek a plea deal. In his opinion, the claims made by prosecutors "are not nuanced ones over which there can be a reasonable argument."
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