Aspiring electric truck maker Nikola has admitted to the Securities and Exchange Commission that nine statements made by founder Trevor Milton were “inaccurate.” Milton was forced to resign from Nikola in September, shortly after the falsehoods came to light.
Between 2016 and 2020, Milton spilled a string of gossip about his fledgling truck maker. At a 2016 press event, Milton took the stage to present a prototype of the company’s first truck, called the Nikola One. During the event, Milton claimed that the truck was “fully operational.” Nikola never actually managed to get the truck to move under its own power.
Nikola’s most infamous flimflam came in 2018, when the company released a video of the Nikola One “in motion.” In reality, Nikola had towed the inoperative truck up to the top of a long, shallow incline and lowered it, tilting the camera to make it look like it was driving on flat ground.
These and several other misstatements came to light in September after a short selling company called Hindenburg Research published a report declaring Nikola a “massive fraud.” In response, Nikola commissioned the law firm Kirkland and Ellis to examine Hindenburg’s allegations. While the resulting report has not been released, Nikola has now faced nine inaccurate statements prior to Milton’s departure in September 2020. They include:
- “In July 2016, the Company declared that it owned rights to natural gas wells and in August 2016 that the wells were used as backup for solar hydrogen production.”
- “In April 2019, Milton stated that the solar panels on the roof of the company’s headquarters produce approximately 18 megawatts of energy per day.”
- “In December 2019 and July 2020, Milton stated that the Company ‘can produce’ more than 1,000 kg of hydrogen at the Company’s demonstration stations and that the Company was ‘below’ $ 3 / kg at that time “.
- “In July 2020, Milton stated that ‘all major components are made in-house'”
Nikola now admits that these statements “were inaccurate in whole or in part, when made.”
Nikola says Kirkland and Ellis have not decided whether the company violated any laws when it made these misstatements. The company’s investigation is ongoing.
Nikola says he could still face serious legal consequences for these misstatements. Federal prosecutors and the Securities and Exchange Commission took an interest in the situation last September. Nikola says he can’t predict how those investigations will turn out. Nikola has incurred $ 8 million in legal fees under a severance settlement with Trevor Milton.
Nikola is trying to get over Trevor Milton
At the same time, Nikola maintains that the main thesis of the Hindenburg report, that Nikola was a “massive fraud”, is not accurate. Milton was really trying to build a viable hydrogen transportation business, however incompetent. While he greatly exaggerated Nikola’s capabilities, he also hired experienced engineers to work on his products. Before his departure, Milton signed deals with companies that really know how to design and build trucks.
So while Nikola’s new administration is trying to put Milton’s antics behind it, they have carried on with the most promising aspects of the founder’s strategy. In fact, when it released its quarterly financial results this week, Nikola said it had completed the assembly of five prototypes of its Nikola Tre battery-electric truck in partnership with IVECO, an Italian truck manufacturer. Nikola says he is working with IVECO to build a manufacturing plant in Germany, and trial production is scheduled to start in June. Nikola is also building a truck factory in Arizona that he hopes to start making trucks later this year.
Nikola says he will put the trucks in the hands of customers before the end of the year. In a conference call Thursday, the company said there remains strong demand for its battery-electric trucks.
Nikola also said that its hydrogen electric trucks are on track to a planned 2023 launch date. The company recently announced an electricity supply agreement with an Arizona power company that will help Nikola produce low-cost hydrogen fuel for its planned network of hydrogen fueling stations.
Nikola was able to obtain a minimum price for electricity because hydrogen production can be suspended during hot summer afternoons. That’s valuable to utilities because they have to spend a lot of money to ensure they have enough capacity during peak periods. A customer who commits to zero power consumption during peak demand periods adds very little cost, allowing you to get a great deal. Nikola says he hopes to get similar deals in other states.
In short, Nikola’s new management is really trying to turn Nikola into a viable trucking company. They have scrapped the most ridiculous parts of Milton’s vision, like the Badger truck, and are focusing on the more viable aspects.
But time is running out. Nikola lost nearly $ 150 million in the fourth quarter of 2020 and has $ 840 million in the bank. So the company will need to raise more money in a short time. And to do that, company leaders must convince investors that they have left Milton’s wiles behind and are now running a normal company with a viable business strategy. It is not clear if they will succeed. But they are trying.