Nikola Hit with $125M Fine For Lying to Investors
Following a year-long investigation into the company’s representation of its business practices, the SEC found that Nikola lied about its products’ and facilities’ technical capabilities, leading investors to believe they were more propitious than they actually were. In the settlement, the SEC accused Nikola of having “misled investors by misrepresenting or omitting material facts about the refueling time of its prototype vehicles, the status of its headquarters’ hydrogen station, the anticipated cost and sources of electricity for its planned hydrogen production, and the economic risks and benefits associated with its contemplated partnership with a leading auto manufacturer.”
Such deceit served Nikola by boosting its stock price to the tune of a $26 billion valuation despite a complete lack of revenue. Having positioned itself as the next big thing, Nikola earned an 11 percent backing from General Motors—which appeared to further legitimize the company’s promise. Nikola still hadn’t sold a single truck, but founder Trevor Milton was already rolling in cash; even after being forced to resign from his position as chairman and CEO last year, he and his spouse are estimated to hold Nikola stock worth $458 million.
Now the company’s sparkling successes seem to be crumbling to the ground. The SEC claims Nikola violated the antifraud and disclosure control provisions of the Securities Act of 1933, as well as the Securities Exchange Act of 1934, by misleading investors “through scores of misrepresentations by its CEO” and “[painting] a picture of Nikola that diverged widely from its then-current reality.” The settlement details occasions on which Milton tweeted that his company was actively producing hydrogen (it wasn’t) and had sourced electricity using renewable or “clean” methods (it hadn’t). Milton also allegedly told multiple people that Nikola had engineered and prototyped an electric pickup truck made mainly with proprietary parts. “The Badger,” as this imaginary truck was called, did exist on paper but was contracted to be produced by GM. The Badger program as it was written would also have lost the company $3.1 billion over the course of six years.
The settlement doesn’t require that Nikola admit to or deny the SEC’s charges. Nikola appears to be thankful for the chance to wipe its hands of the investigation, saying in a separate statement that it’s “pleased to bring this chapter to a close” and that it will be seeking reimbursement for costs and damages from Milton. Milton will continue to face federal criminal charges, for which he was indicted earlier this year.
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