Nikola founder and chair steps down amid claims of “intricate fraud”

Trevor Milton, the founder and executive chairman of Phoenix-based battery and hydrogen vehicle maker Nikola, has resigned from the company amidst allegations that he misled investors and amid allegations that the company is an “intricate fraud”.

Nikola has quickly risen in popularity and worth over the last few months, declaring its ability to develop long-haul trucks powered by hydrogen or battery electricity. It was only earlier this month that American automotive giant General Motors (GM) committed to acquire an 11 stake valued at $US2 billion in the company.

Founded in 2015, Nikola has led a very public life, and according to recent estimates has seen its value soar to $US13 billion, while simultaneously drawing attention to the decarbonisation of long-haul trucking.

The GM announcement was thought to have put doubts about the company’s claims to bed, but financial research firm and short seller Hindenburg Research has published claims that “Nikola is an intricate fraud built on dozens of lies over the course of its founder and executive chairman Trevor Milton’s career.”

The research, published on September 10, claimed “extensive evidence—including recorded phone calls, text messages, private emails and behind-the-scenes photographs”that detailed dozens of false statements by Milton.

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

After initially rejecting the claims, the company announced on Monday “that Trevor Milton approached the board of directors and proposed to voluntarily step aside as Executive Chairman and from the Board.”

The board accepted his proposal and appointed Stephen Girsky, the former vice chairman of GM and a member of Nikola’s board, as the chairman of the board, effective immediately.

The report by Hindenburg Research, which is publicly available and runs to 15,000 words, concludes that Milton’s actions involved everything from “material lies about capabilities, partnerships and products that simply do not exist at all” to “the staging of misleading videos, which require extensive premeditation, planning and execution”.

This last refers to the company’s 2018 video claiming to show “the Nikola One in motion” when, in actual fact, the video did not show the battery and hydrogen fuel cell truck driving under its own power, but in fact rolling downhill.

In response to Hindenburg Research, Nikola first published an immediate statement refuting the allegations:

“Yesterday, an activist short-seller whose motivation is to manipulate the market and profit from a manufactured decline in our stock price published a so-called “report” replete with misleading information and salacious accusations directed at our founder and executive chairman,” it said.

“To be clear, this was not a research report and it is not accurate. This was a hit job for short sale profit driven by greed.”

Three days later the company published a lengthy press release, picking over the various claims and refuting it where possible. However, in regards to the video of its Nikola One, the best the company could muster was that it “never stated its truck was driving under its own propulsion in the video, although the truck was designed to do just that”.

Nikola’s underlying claim in response to the Hindenburg Research report was that “the opportunistic timing of its publication shortly after 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.”

And, indeed, Hindenburg Research discloses at the end of its report that “We are short shares of Nikola Corp”.

However, much of the report ties in to other reporting – such as the claims by Bloomberg in June of 2020 that “The Nikola One revealed in 2016 was inoperable, missing parts”, and that “gears and motors were missing” and “there was no fuel cell on board”.

Unsurprisingly, Nikola’s shares have collapsed over the past few weeks, beginning a 44% slump since September 8, two days before the Hindenburg Research report is dated as published.

“Nikola is truly in my blood and always will be, and the focus should be on the Company and its world-changing mission, not me,” said Milton in a statement published Sunday. “So I made the difficult decision to approach the Board and volunteer to step aside as Executive Chairman. Founding Nikola and growing it into a company that will change transportation for the better and help protect our world’s climate has been an incredible honor.”