Nikola Fined $125 Million by SEC for False Claims. Stock Falls.
A Nikola Tre battery-electric heavy duty truck at the Nikola-Iveco joint venture electric truck plant in Ulm, Germany.
Fifteen months after the short-selling firm Hindenburg Research challenged the story told by Nikola , the electric- truck developer has agreed to settle civil fraud charges brought by the Securities and Exchange Commission. Without admitting the charges announced Tuesday morning, Nikola will pay a $125 million fine to compensate defrauded investors.
Nikola (ticker: NKLA) stock rose in premarket trading, but gave up ground for a loss of about 0.5% to $9.20 a share by mid morning. The S&P 500 and Dow Jones Industrial Average were up about 0.9% and 1.1%, respectively.
Investors are digesting the news, including a statement in the news release that the company will seek reimbursement from founder and former CEO Trevor Milton. Milton didn’t respond to a request for comment about the settlement or Nikola’s plans.
The agency filed civil fraud charges in July against Milton, concurrently with the unsealing of a criminal indictment against him for securities fraud by the U.S. Attorney for the Southern District of New York. Milton pleaded not guilty and has sought to dismiss the criminal case, or move it to another federal court. The SEC’s case against Milton is held in abeyance to the parallel criminal case.
Nikola’s electric trucking ambitions made its stock one of the hottest tickets in last year’s enthusiasm for green-energy businesses coming public through mergers with SPACS, or special purpose acquisition companies. When Hindenburg voiced its doubts in September 2020, Nikola shares had eased from their June 2020 peak of $76. Even so, at Monday’s closing price of $9.25, Nikola stock is down more than 75% since the Hindenburg expose. Over the same period, the S&P 500 was up about 34%. Many SPACs and electric truck ventures have lost momentum in that time.
In the administrative order announced Tuesday, the SEC alleges that Milton inflated the company’s stock with tweets and media appearances that falsely stated Nikola’s technological achievements, its in-house production capabilities and its order book. According to the SEC, Nikola misled investors about its expected costs for making hydrogen, the refueling time of its prototype trucks, and the economics of Nikola’s planned partnership with General Motors (GM).
“ Nikola Corporation is responsible both for Milton’s allegedly misleading statements and for other alleged deceptions, all of which falsely portrayed the true state of the company’s business and technology,” said SEC enforcement director Gurbir Grewal, in the agency’s Tuesday press release.
A spokesperson for Nikola told Barron’s that the company had no comment on the SEC action. But the agency’s announcement says the company is continuing to cooperate with the SEC in an investigation that agency officials say is ongoing and active.
Attorneys for Milton didn’t respond to queries from Barron’s.
Milton left Nikola weeks after Hindenburg’s report suggested that videos of the company’s truck speeding down the road were filmed while an unpowered prototype was rolled downhill. Although the company initially disputed the shortseller’s allegations, an internal investigation commissioned after Milton’s departure concluded that nine statements made by Milton were “inaccurate in whole or part.”
Nikola has sought to distance itself from its founder, and recently delivered some early production models of its Tre trucks. It still sports a market capitalization of almost $4 billion.