Eco-vehicle startup Nikola admitted to the US Securities and Exchange Commission (SEC) that nine statements by company founder Trevor Milton were “Imprecise”… Indeed, between 2016 and his dismissal in 2020, Mr. Milton made a number of highly misleading statements about his company.
For example, at a press conference in 2016, he took the stage to present a prototype of the company’s first truck, dubbed the Nikola One. During the event, the manager claimed that the truck “Fully functional”… Nikola never actually got the truck moving on its own.
And the most notorious public deception by Nikola was the 2018 video, when Nikola One was shown on the move. In fact, the company towed the idle truck to the top of a long, gentle slope and rolled it down, turning the camera so that it appeared to be moving on a horizontal surface.
These and several other “reality embellishments” came to light in September after securities short-selling firm Hindenburg Research published a report in which it accused Nikola of massive fraud. In response, the company instructed law firm Kirkland and Ellis to investigate the allegations. Although the final report has not yet been released, Nikola has already admitted to nine “Inaccurate statements”made prior to Mr. Milton’s resignation in September 2020. These include, among others:
- in July 2016, the company announced that it owns the rights to natural gas wells, and in August 2016, these wells were used as a backup source for solar hydrogen production;
- in April 2019, Trevor Milton announced that solar panels on the roof of the company’s headquarters generate approximately 18 megawatts of energy per day;
- in December 2019 and July 2020, Mr. Milton stated that the company is capable of producing more than 1000 kg of hydrogen at demonstration stations and that the cost of 1 kg was below $ 3;
- in July 2020, Milton announced that all the main components of the company’s machines are manufactured by itself.
Nikola has now admitted that these statements were incorrect in whole or in part at the time of publication. Kirkland and Ellis have yet to decide if Nikola violated any laws when making these false statements – an investigation is ongoing. However, the automaker itself says that these distortions can still entail serious legal consequences. Federal prosecutors and the SEC became interested in the situation last September. The company has already incurred $ 8 million in legal costs under a damages agreement with Trevor Milton.
At the same time, Nikola claims that the main thesis of the Hindenburg Research report on the accusation of mass fraud is not fair. Mr. Milton did try to build a viable hydrogen transport business, albeit ineptly. Although he grossly exaggerated Nikola’s capabilities, experienced engineers were hired to work on the products. Before leaving, the leader made deals with companies that really know how to design and build trucks.
Thus, while Nikola’s new management is trying to recover from Mr. Milton’s antics, they are going to continue the founder’s most promising projects and strategies. Indeed, when the company released its quarterly financial results this week, Nikola revealed that it had completed assembly of five prototypes of its Nikola Tre electric truck in partnership with Italian manufacturer IVECO. A plant is under construction in Germany, and trial production is scheduled to begin in June. Nikola is also building a plant in Arizona, which she hopes will begin producing trucks later this year. However, in 2021 it is planned to produce only about a hundred cars.
Nikola still has about $ 900 million in cash in the bank, and last year losses amounted to $ 117 million. Nikola assures that its hydrogen electric trucks will enter the market in 2023, and for this the company has curtailed work on a jet ski and an all-terrain vehicle powered by electric traction, and more earlier – above the Badger pickup. Contracts have been signed to establish hydrogen production. All in all, the new management is really trying to turn Nikola into a viable green truck manufacturer. But time passes, and cash melts. Whether investors with a tarnished reputation will give the money they need to start a business is a big question.
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