Head of Nikola, a GM Electric truck partner, quits amid fraud claims
By Jack Ewing and Neal E. Boudette
Trevor Milton, a college dropout, turned his entrepreneurial visions into Nikola, a startup aiming to develop long-haul semitrucks powered by hydrogen and electricity. General Motors was so taken with the idea that it took a $2 billion stake in the company, even though it essentially has no revenue and has not produced a single truck.
But Milton’s ascent has come to an abrupt end. On Sunday night, Nikola announced that he had resigned as chair amid allegations that he had deceived investors about the company’s technology.
His departure followed a report by the investment fund Hindenburg Research on Sept. 10 accusing him of making numerous false assertions about Nikola’s technology, including producing a video in which a truck was rolled down an incline to make it look as if the company had developed a working prototype.
Hindenburg, a short-selling firm that said it was aiming to profit by betting Nikola’s share price would go down, called Nikola “an intricate fraud.” Its report appeared two days after the company and GM agreed to cooperate on production of battery-powered pickup trucks and hydrogen-powered heavy trucks.
Nikola, based in Phoenix, called the accusations by Hindenburg “false and defamatory” and said it would complain to the Securities and Exchange Commission. Nikola shares, which had jumped after the deal with GM, fell sharply after the Hindenburg report. On Monday, the shares lost 19%, closing at barely half their value after the GM deal was announced.
Bloomberg News reported last week that the SEC was looking into the Hindenburg allegations against Nikola, and The Wall Street Journal reported that the Justice Department was doing so. Neither agency has confirmed that an investigation is underway.
Milton said in a statement that “the focus should be on the company and its world-changing mission, not me. So I made the difficult decision to approach the board and volunteer to step aside.”
Stephen Girsky, a former vice chairman of GM and a member of Nikola’s board, will take over as chairman.
While denying Hindenburg’s accusations, Nikola acknowledged that a 2017 prototype truck that appeared in a promotional video was not operating under its own power.
“Nikola never stated its truck was driving under its own propulsion in the video,” the company said in a statement.
Nikola said it had since built fully functional models.
The deal with GM held the prospect of providing crucial help in assembling a pickup truck that Nikola hopes to introduce by the end of 2022. In exchange, GM took an 11% stake in the company.
GM on Monday affirmed its resolve to go forward with the deal.
“We will work with Nikola to close the transaction,” the company said in a statement. “Our overall goal is to put everyone in an EV and accelerate adoption.”
Analysts have been predicting that traditional carmakers like GM would form partnerships with fast-moving electric car startups in order to catch up with Tesla, which has a considerable lead in battery technology. GM’s deal with Nikola illustrates the hazards of that approach.
Whatever the state of its technology, few companies have experienced Nikola’s meteoric rise. Milton, 39, started a security alarm business and then a company that sought to convert diesel engines to run on natural gas before it ran into legal trouble and was sold. In 2014, he founded Nikola with a plan to produce zero-emission semitrucks that run on hydrogen fuel cells and batteries.
His ambitions mirror those of another company that aimed to shake up the automotive industry: Tesla. Milton even drew on the same source for his company’s name — inventor Nikola Tesla, who achieved breakthroughs in electric motors in the late 1800s.
Milton unveiled a semitruck, called the Nikola One, in 2016, and said it was operational.
“It’s not a pusher,” Milton said at the event, using an industry term for a mock-up vehicle that cannot be driven and must be pushed.
In its report, Hindenburg Research contended that the promotional video showing the moving 2017 prototype and Milton’s statements were part of “an ocean of lies.” It also accused Milton of claiming Nikola had proprietary technology, when it sourced components from suppliers.
Hindenburg’s founder, Nathan Anderson, declined to say how much money his company had put into shorting Nikola shares or how much it had made since the report was released.
In a lengthy written rebuttal to Hindenburg’s claims, Nikola acknowledged the truck shown in the 2017 promotional video was not moving on its own. But it said that a semitruck, the Nikola Tre, was being produced in a joint venture with Iveco, the Italian truck-maker, and would be available by the end of next year. Republic Services, the trash hauler, has placed an order for 2,500 electric garbage trucks, Nikola added.
Milton also posted pictures of what he said are five trucks being assembled in Ulm, Germany.
“Do these look fake?” he wrote.
The day-to-day running of Nikola is in the hands of Mark Russell, the chief executive, whose ties to Milton go back several years. Before joining Nikola as president last year, he was chief executive of Worthington Industries, a diverse maker of steel products like tanks for propane, hydrogen, helium and natural gas. Worthington acquired Milton’s diesel conversion company, dHybrid Systems, in 2014 and also invested in Nikola.