Written by Theo König – January 12, 2022
Reviewed by Asaf Kedem
It’s official: Nikola Corporation have resolved their ongoing legal issues with the SEC – the penalty being a $125 million fine paid over five installments over the next two years.
Nikola Corporation was founded in 2015 in Phoenix, Arizona by Trevor Milton. The company specializes in zero-emission vehicles, specifically heavy-duty vehicles that run on hydrogen technology (though the company also works with electric-battery platforms). The company also focuses on energy storage systems and has put a heavy emphasis on developing a hydrogen station infrastructure across in the U.S.
In June 2020 the company went public via a Special Purpose Acquisition Company (abbreviated to SPACs) and thereby placed themselves under the disclosure obligations set out by the Securities and Exchange Commissions (SEC). Many automotive start-ups such as Canoo and Lordstown Motors have chosen to go public through a SPAC and the phenomenon is quickly becoming the hottest financial trend (former U.S. president Donald Trump is currently in talks to bring his social-media company public through a SPAC). For our less financially versed readers, a SPAC (also known as a black-check company) is a company that is formed solely for the purposes of raising funds by bringing a company public (through an Initial Public Offering) in order to later buy another, existing, company. The biggest advantage of using a SPAC to go public is that the company can raise funds through the IPO much faster than by attempting to go public alone.
Allegations of Fraud
In September 2020, Hindenburg Research published an article alleging that Nikola Corp. and its CEO and Executive Chairman, Trevor Milton, had lied to its investors about the state and progress of the technologies the company offered. Particularly scathing was the claim that Nikola had not been able to have operational semi-trucks running on hydrogen. Instead, the company had staged videos of the hydrogen trucks rolling down-hill and altered the images to make it seem like the trucks were fully functional.
Flash-forward to today (Jan. 12, 2022) and Trevor Milton had left the company in disgrace. In fact, Nikola Corporation were quick to announce that they were taking action against Mr. Milton and that the SEC is still following charges on the matter. For Nikola Corp., however, this resolves the accusations that “Nikola defrauded investors by misleading them about products, technical advancements, and commercial prospects”, however, under the terms of the resolution, Nikola neither admits nor denies the allegations made against them. The $125 million fine will end a murky chapter in the company’s history – one that almost put the entire company out of business in 2020.
Auto Trendy’s take:
Nikola Corp. will certainly be relieved to put this story behind them. When the news broke on Dec. 21, 2021, Nikola Corp.’s stock price jumped 19% to $10.01 – hopefully a sign of better things to come. However, it won’t be smooth sailing just yet. The company’s partnership with General Motors Co. is not going to happen and investor trust still needs to be rebuilt, especially with repeated production delays announced throughout 2022. Commercial sales for the Tre semi-truck have been set for early next year, however, and the company plans on producing 25 trucks by the end of 2022, with 2 prototypes already having been released. Therefore, the company can now hopefully look forward to rebuilding confidence surrounding itself within this year.