Nikola Founder and Executive Trevor Milton Resigns After Fraud Allegations

By Adriana Anastasiades Monday, September 21, 2020

Nikola Corporation announced on Monday that its founder Trevor Milton will resign as the executive chairman, as well as from the company’s board, after being faced with the short-selling allegations.

Following this statement, shares of Nikola (NASDAQ: NKLA) tumbled nearly 30% in premarket trading. Milton is the largest shareholder of Nikola Corp and holds a stake of over 20% that’s worth around $3.3 billion, according to Forbes estimates.

Milton to Step Aside

Milton, who’s been credited with the rapid success of Nikola Corporation, faced serious allegations that he “cashed out” on NKLA stock.

“I asked the Board of Directors to let me step aside from my roles as Executive Chairman and a member of the Nikola Board of Directors,” Milton said in a tweet on Sunday.

“The focus should be on the Company and its world-changing mission, not me. I intend to defend myself against false allegations levelled against me by outside detractors.”

The company “is in amazing hands, and the executive team is well-equipped to lead the Company into the future,” he added.

On September 10, a report in Hindenburg Research, a financial analysis firm led by analyst Nate Anderson, described Nikola as an “intricate fraud built on dozens of lies.”

The analyst wrote that Nikola’s revolutionary battery system, that Milton said the company has been working on, actually doesn’t even exist. At the time, Nikola said it had designed a breakthrough battery cell that has double energy density and is only 40% of the weight and half the price of lithium-ion batteries used in Tesla’s electric cars, among others.

“This is the biggest advancement we have seen in the battery world,” Milton said last year.

The truckmaker also claimed to have developed technology and vehicle parts bought from other manufacturers as its own.

“We have never seen this level of deception at a public company, especially of this size,” it is added in the report.

“Trevor has ensured he is not going down with the ship. He cashed out $70 million around the IPO and amended his share lock-up from 1-year to 180 days. If he is fired, his equity awards immediately vest and he is entitled to collect $20 million over two years. Milton has laid the groundwork to extract hundreds of millions from Nikola years before ever delivering on his promises.”

Nikola Denies Allegations

In response to Anderson’s allegations, Nikola issued a statement denying some of the allegations mentioned in the report which the company claims was timed to support the author’s forecasts that Nikola’s stock would plunge.

The Phoenix-based company contacted the Securities and Exchange Commission about the report, and the SEC and the Justice Department are allegedly conducting an investigation.

“Nikola believes that the Hindenburg report, and the opportunistic timing of its publication, shortly after the announcement of Nikola’s partnership with General Motors Co. and the resulting positive share price reaction, was designed to provide a false impression to investors and to negatively manipulate the market in order to financially benefit short-sellers, including Hindenburg itself,” Nikola said in the statement.

The truckmaker said it has encountered extensive due diligence measures by its partner companies such as Bosch, Hanwha Group, Industrial and General Motors (GM), and financial supporters including ValueAct Capital and VectolQ Acquisition Corp., the company it merged with to go public in June. Nikola said Anderson’s report was “false and defamatory.”

Milton issued assertive statements about his company’s hydrogen and battery technology as well as called out critics on social networks. The Hindenburg Research published its report two days after Nikola’s stock jumped 41% on news of its technology and production partnership with General Motors. General Motors holds an 11% stake in Nikola Corp.

“When you build a team as a leader, you have to remember that you are the least important person,” Milton stated. “You have to hire smarter people than yourself and remember that the Company’s mission is greater than you are.”

In the letter where he announced his resignation, Milton said he intended to defend himself against false allegations made by “outside detractors.”

Stephen Girsky, a former vice-chairman of General Motors and a board member at Nikola, will become the company’s new chairman. Girsky thanked Milton for his “visionary leadership and significant contributions to Nikola since its founding.” He added that the company has excellent partners, including General Motors.

Shares of NKLA tumbled nearly 30% in premarket trading on Monday.

Summary

Trevor Milton announced a decision to step down from his duty and from the company’s board after a financial analyst accused the company, and Milton himself, of fraud and misrepresentation. Stephen Girsky, a former venture capitalist (VC) of GM, will replace Milton and become Nikola’s new chairman.

About the Author


Headshot for author Adriana Anastasiades

Adriana is a Journalist with a passion for reporting on business leadership, with a diverse interest in multiple industries.

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