Nikola Corp. founder and former chairman Trevor Milton has been charged by prosecutors with making false statements to investors in the electric-vehicle startup. The company’s shares fell the most in almost five months.
Milton, who stepped down from the company last year, is in federal custody after voluntarily surrendering. He’s charged with misleading investors from November 2019 until around September 2020 about the development of Nikola’s products and technology, according to an indictment unsealed Thursday by federal prosecutors in N.Y.
The Securities and Exchange Commission also filed a complaint against him.
Milton’s lawyers didn’t immediately respond to a request for comment. Nikola said in a statement that has cooperated with the investigation and reiterated its commitment to start vehicle production. “Today’s government actions are against Mr. Milton individually, and not against the company,” the company said.
Shares of the electric vehicle startup fell as much as 11% on Thursday, the biggest intraday drop since March 5 and touching the lowest level since May 26. The stock was down 9.2% to $12.89 as of 10:03 a.m. in New York.
Nikola’s market capitalization has plunged from almost $29 billion in June last year to about $5 billion currently. Milton is the company’s largest shareholder with about a 20% stake in Nikola, according to data compiled by Bloomberg.
Nikola went public through a reverse merger with a blank-check company in June 2020, a deal made Milton into an overnight billionaire. At one point, the company’s shares ballooned to almost $80 apiece, giving it a market capitalization greater than Ford Motor Co. despite not generating any meaningful revenue.
Days after the startup’s shares debuted, Bloomberg News reported that Milton had exaggerated the capability of the company’s debut truck, the Nikola One. That story got the attention of an activist investor at Hindenburg Research, which published a detailed report in September accusing Milton and Nikola of deceiving investors.
The claims Nikola’s founder made about that early vehicle were among those highlighted in the SEC’s complaint.
“Milton sold a version of Nikola not as it was — an early stage company with a novel idea to commercialize yet-to-be proven products and technology — but rather as a trail-blazing company that had already achieved many groundbreaking and game-changing milestones,” according to the complaint.
The fallout from the accusations has forced Nikola to curtail its ambitions after setbacks such as a much-diminished deal with General Motors and the cancellation of an electric-powered garbage truck program with Republic Services.
Nikola initially denied the claims by Hindenburg, which was betting against its shares. But Milton resigned later that month, and in February the company said an internal review of claims about its technology concluded the startup and its founder made several inaccurate statements.
Among the false and misleading statements Milton made, according to the indictment:
– That the company had a “fully functioning” semi-truck prototype known as the “Nikola One,” despite the fact that Milton knew that the prototype was inoperable.
– That Nikola had engineered and built an electric- and hydrogen-powered pickup truck known as “the Badger” from the “ground up” using Nikola’s parts and technology, which he knew was not true.
– That Nikola was producing hydrogen and was doing so at a reduced cost, when “no hydrogen was being produced at all by Nikola, at any cost.”
– That Nikola had developed batteries and other important components in-house, when they were buying them from third parties.
– That reservations for Nikola’s semi-trucks were binding orders representing billions in revenue, when they were actually able to be canceled at any time “and were for a truck Nikola had no intent to produce in the near-term.”