Nikola
The aspiring electric truck maker Nikola admitted to the Securities and Exchange Commission that nine statements made by founder Trevor Milton were “inaccurate”. Milton was forced to resign Nikola in September, shortly after the falsehoods surfaced.
Between 2016 and 2020, Milton told a series of swashbucklers about his new truck manufacturer. At a press conference in 2016, Milton took the stage to reveal a prototype of the company’s first truck, dubbed Nikola One. During the event, Milton said the truck “works fully”. In fact, Nikola never made the truck run on its own.
Nikola’s most famous flimflam came in 2018, when the company released a Nikola One video “on the move”. In fact, Nikola hauled the dead truck to the top of a long, shallow slope and rolled it down, tilting the camera so that it looked like it was driving on level ground.
These and several other false statements surfaced in September, after a short selling firm called Hindenburg Research published a report declaring Nikola to be a “massive fraud”. In response, Nikola hired the Kirkland and Ellis law firm to examine Hindenburg’s allegations. Although the resulting report has not been made public, Nikola has now responded to nine inaccurate statements prior to Milton’s departure in September 2020. They include:
- “In July 2016, the Company stated that it had rights to the natural gas wells and in August 2016 that the wells were used as a reserve for the production of solar hydrogen”
- “In April 2019, Milton stated that the solar panels on the roof of the company’s headquarters produce about 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 that Kirkland and Ellis did not decide whether the company violated any law when it made these incorrect statements. The company’s investigation is ongoing.
Nikola says he may still face serious legal consequences for these distortions. The Federal Public Ministry and the Securities and Exchange Commission were interested in the situation last September. Nikola says he cannot predict how these investigations will result. Nikola has incurred $ 8 million in attorney fees under an indemnity agreement with Trevor Milton.
Nikola is trying to get past Trevor Milton
At the same time, Nikola argues 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 transport business, albeit in an incompetent way. While he greatly exaggerated Nikola’s capabilities, he also hired experienced engineers to work on his products. Before leaving, Milton closed deals with companies that really know how to design and build trucks.
So, while Nikola’s new administration is trying to overcome Milton’s antics, they continue with the most promising aspects of the founder’s strategy. In fact, when he released his quarterly financial results this week, Nikola said he completed the assembly of five prototypes of his Nikola Tre battery electric truck in partnership with IVECO, an Italian truck manufacturer. Nikola says he is working with IVECO to build a factory in Germany, with experimental production scheduled to start in June. Nikola is also building a truck factory in Arizona that hopes to start making trucks later this year.
Nikola says he will put the trucks in customers’ hands before the end of the year. In a conference call on Thursday, the company said there was still strong demand for its battery powered electric trucks.
Nikola also said that its hydrogen electric trucks are on track for a planned launch date of 2023. The company recently announced an electricity supply agreement with an Arizona electric utility that will help Nikola produce fuel hydrogen at a low cost. for your planned network of hydrogen stations.
Nikola got a very low price for electricity because hydrogen production could be suspended during hot summer afternoons. This is valuable for electric utilities because they have to spend a lot of money ensuring that they have sufficient capacity during periods of peak demand. A customer who commits to consuming zero energy during periods of peak demand adds very little cost, allowing them 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 truck company. They’ve ruled out the most ridiculous parts of Milton’s vision – like the Badger truck – and are focusing on the most viable aspects.
But time is running out. Nikola lost almost $ 150 million in the fourth quarter of 2020 and has $ 840 million in the bank. Therefore, the company will need to raise more money soon. And to do that, company leaders need to convince investors that they left Milton’s cheating in the past and are now running a normal company with a viable business strategy. It is not clear whether they will succeed. But they are trying.