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Deal
Shares of electric truck maker Nikola Corp fell as much as 30 percent on Monday after founder Trevor Milton resigned following allegations of nepotism and fraud by a Wall Street short seller that attracted the interest of US regulators.
FILE PHOTO: US Nikola CEO and Founder Trevor Milton speaks during the unveiling of his new all-electric hydrogen fuel cell battery trucks in association with CNH Industrial, at an event in Turin, Italy, on 2 December 2019. REUTERS / Massimo Pinca
REUTERS: Shares of electric truck maker Nikola Corp fell as much as 30 percent Monday after founder Trevor Milton resigned following accusations of nepotism and fraud by a Wall Street short seller that piqued the interest of regulators Americans.
The company appointed Stephen Girsky, a former vice president of General Motors Co and a member of Nikola’s board of directors, to assume the role of president, as it strives to regain investor confidence.
GM, which recently announced that it would receive an 11 percent stake in Nikola under a partnership, said in a statement Monday that it would work with Nikola to close the deal, emphasizing that it was just one element of its electric vehicle strategy.
In a scathing report published just after GM’s merger two weeks ago, short-seller Hindenburg Research said it had enough evidence to show that Nikola and Milton made false claims about the company’s proprietary technology to form partnerships with large manufacturers of automobiles.
Hindenburg also alleged that Milton appointed his brother, Travis, to lead a unit at the company for which he had no substantial industry-related experience. (https://reut.rs/3mFQ6mM)
“The focus should be on the company and its mission to change the world, not on me,” Milton, who owned 25 percent of the company’s outstanding shares at the end of July, said in his resignation letter.
“So I made the difficult decision to approach the board and volunteer to step aside.”
He said the accusations were false and that he would defend himself against them.
The company said Milton had agreed to give up the 4.9 million units of performance-based shares awarded to him last month, as well as the option of a two-year consulting contract that would have netted him $ 20 million. .
Stock market investors, who have been selling the company’s shares for a week, were unconvinced, causing the shares to drop as much as a third on early deals before finding any support.
Short sellers betting against the stocks together made $ 104 million in Monday’s slide, according to data from financial analytics firm S3 Partners.
“While the departure of founder Trevor Milton may give the appearance of a company that is moving forward, we believe this is just the beginning of Nikola’s unraveling,” Hindenburg said in his own statement Monday, asking GM to reassess its deal.
GM agreed to build an electric pickup for Nikola and supply hydrogen fuel cells and batteries for commercial trucks. In return, GM is also expected to receive payments of up to $ 700 million to assemble the Nikola Badger truck.
Nikola shareholder and Italian vehicle equipment maker CNH Industrial declined to comment, while German supplier and investor Robert Bosch said he intended to continue working with the company.
Nikola, a Tesla competitor of Elon Musk in the trucking space, said last week that he was discussing the claims with the U.S. Securities and Exchange Commission (SEC). He has publicly rejected the allegations and threatened legal action against Hindenburg.
The Financial Times reported last week that the US Department of Justice was also investigating the allegations.
Broker JPMorgan noted that Milton’s resignation could weigh on some of the partner and client relationships he has forged, but said Girsky is better suited to the role as Nikola moves on to his next phase.
Broker RBC cut its price target for Nikola by $ 28 to $ 21 after the founder’s resignation.
(Reporting by Rama Venkat, Ayanti Bera and Munsif Vengattil in Bengaluru; Edited by Patrick Graham, Anil D’Silva and Maju Samuel)
