Trevor Milton, CEO and Founder of US Nikola, speaks during a presentation of his new all-electric and hydrogen fuel cell battery truck in collaboration with CNH Industrial at an event on December 2, 2019 in Turin, Italy.
Massimo Pinca | Reuters
Competitive electric vehicle startup Nikola has admitted that ousted founder and chairman Trevor Milton made several inaccurate statements from 2016 that misled investors through the company’s IPO last year.
The company highlighted nine comments from Milton between July 2016 and July 2020 that, according to their annual filing on Thursday with the Securities and Exchange Commission, “were wholly or partially inaccurate when made”.
Milton left Nikola in September after short-seller Hindenburg Research fraud cases that led to federal investigations. Milton and the company previously contested many of the claims made in the report. He and Nikola have received grand jury summons from the US District Attorney’s Office for the South District of New York and NY County Attorney’s Office indicating a criminal investigation. Milton resigned on September 20, the day after receiving the summons from the southern district grand jury.
The inaccurate statements ranged from having rights to natural gas wells to the company’s ability to produce hydrogen. The company also said Milton’s claims that the prototype Nikola One prototype was fully functional were among the many false claims the company had previously admitted.
Nikola pays Milton attorney fees of $ 8.1 million under the company’s compensation agreement with him. This has helped Nikola’s legal expenses jump to $ 27.5 million over the past year. Most of that, $ 24.7 million, was spent responding to regulatory and criminal investigations and other litigation related to Hindenburg Research’s claims, the company said.
Nikola went public on June 4 as part of a reverse merger with VectoIQ, a special-purpose acquisition company, or SPAC. It was the first high-profile automotive company to go public via a SPAC.
A Nikola spokeswoman declined to comment on whether the company will attempt to recoup Milton’s legal fees. Additional legal fees are expected this year related to the Hindenburg report, which has also led to an SEC investigation.
According to the company, around $ 1.5 million in Milton’s legal fees were paid in 2020. The startup had a loss of $ 384.3 million last year, including $ 147.1 million in the fourth quarter, it said on Thursday. Adjusted pre-tax loss for 2020 was $ 200.5 million.
As part of the outcome, Nikola also lowered delivery expectations for its first product, called Tre Semitruck, from 600 this year to 50-100 due to supplier issues. The company’s shares fell more than 6% on Friday morning.
“The pandemic has caused significant supply chain disruption,” Nikola CEO Mark Russell said during a call for earnings, specifically referring to a shortage of battery cells to power his vehicles.
“We incurred significant costs due to the regulatory and legal issues surrounding the Hindenburg article,” Nikola said in the filing. “The total cost of these matters will depend on many factors, including the duration of these matters and the determination made.”
Hindenburg accused Milton of making false statements about Nikola’s technology to grow the company and partner with auto companies. The report, titled Nikola: How to Partner an Ocean of Lies with America’s Largest Automaker, was released two days after the announcement of a deal with General Motors that skyrocketed both companies’ shares in September . It characterized Nikola as “an intricate fraud based on dozens of lies” by Milton.
Nikola denied and previously denied many of the allegations, but confirmed one of Hindenburg’s biggest claims – that it staged a video showing a truck that appeared to be functional but not working.
An internal investigation by Kirkland & Ellis LLP into statements made by Milton and the Company during this period has “substantially been completed”. The Chicago-based law firm has not reached a conclusion whether statements that may have been inaccurate when filed are against any law, the company said.
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