By on February 26, 2021

The outside firm Nikola hired to conduct the internal investigation looking into the validity of claims made by ousted founder Trevor Milton has reached a conclusion. Milton does appear to have been fabricating the status of the company’s technology and how far along its prototypes were. But Nikola wasn’t helping and ended up being implicated in a few falsehoods of its own.

Some wealthy individual lying to a sea of people for the sake of making money is hardly news, however. The entire world runs on politicians and business people going back on promises made months earlier and clarifying statements that never seem to illuminate anything. What makes Milton’s offense so bad is that he seems to have used the power of lying to mislead investors who might have otherwise made money. Nikola shares never truly recovered from the exposé published by Hindenburg Research as part of its plan to short the company, and those who never bothered to question the legitimacy of its technical claims before investing are suddenly very interested in knowing everything about the business.

By the time Nikola was getting into the reverse merger with VectoIQ, a special purpose acquisition company (SPAC), as a way to make sure their IPO was swinging for the fences, we thought its market valuation was absolutely insane. But we didn’t learn how much investors had missed the mark until after the Hindenburg report got the Securities and Exchange Commission (SEC) hot and bothered.

Nikola initially denied the claims of fraud made against it, but Milton still left the company in September. It was then announced that the business would be hiring an impartial team to conduct an internal probe that would get to the bottom of everything. Unfortunately, their findings seem unlikely to usher Nikola out of its current jam. According to Bloomberg, both the company and its founder will have more explaining to do.

From Bloomberg:

The company’s internal review found the questionable assertions — seven of which were made by Milton and two by Nikola — were “inaccurate in whole or in part, when made,” according to the filing.

The misleading statements included a December 2016 claim by Milton that one of Nikola’s first prototypes, the Nikola One, was a fully-functioning vehicle. Bloomberg News reported in June that Milton had greatly exaggerated the capabilities of the truck. It could not be driven at the time it was shown publicly because of missing parts, according to people familiar with the matter.

The business also seems to have overblown claims about its ability to reliably produce hydrogen and ownership rights to natural gas wells. It’s the sort of thought that leaves one scratching their head because the people in charge had to know that this would catch up with them eventually. Maybe the internal probe was less about uncovering truths then getting Nikola to further distance itself from Milton.

Both he and the company have been issued grand jury subpoenas, the kind that foreshadow criminal investigations, from the U.S. Attorney’s Office for the Southern District of New York and the N.Y. County District Attorney’s Office. Reports have indicated that Nikola is paying $8.1 million in attorney fees for Milton as part if its corporate indemnification agreement with him. While just part of the $27.5 million it spent last year to fund its legal defense, it represents a very small fraction of what it is likely to incur this year. Keep in mind that things didn’t really kick off in earnest until late into the fall of 2020.

As you might imagine, this has forced Nikola to reassess the situation. On Thursday, the company announced it had lost $384.3 million last year, with the biggest hit coming in the forth quarter. That, combined with the ongoing semiconductor and battery shortages have apparently required it to lower expectations. For example, the super-advanced Tre semitruck that was supposed to see 600 deliveries this year is now estimated to be somewhere between 50 and 100 units.

“The pandemic has caused significant supply chain disruptions,” Nikola CEO Mark Russell said during the earnings call, adding that additional downsizing had helped stabilize the business. “We now believe Nikola is in the best position the company has ever been to execute on our core business plan.”

[Image: Nikola]

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5 Comments on “Nikola Embarrassed After Internal Review, Now Downsizing...”


  • avatar
    SCE to AUX

    Good article.

    “We now believe Nikola is in the best position the company has ever been to execute on our core business plan.”

    Huh? This guy should be investigated, too.

    “It could not be driven at the time it was shown publicly because of missing parts, according to people familiar with the matter.”

    Google tells me that Nikola employs 348 people. I’d bet at least 347 of them knew the company’s leaders were snowing the press. You’d have a whole team of engineers, technicians, and supply chain people who *knew* Milton was lying about a running prototype. Most of them are probably looking for jobs ASAP, and some may even be omitting Nikola from their resume.

    Nikola is doing for hydrogen-powered trucks what the Hindenburg did for hydrogen-powered dirigibles.

    The SEC ought to suspend trading on NKLA right now. The whole thing is a sham.

  • avatar
    Varezhka

    Nikola’s core business plan has always been to lie to the investors to get some money and then have someone else do the hard work of making the FC trucks. When Volvo balked they had no where to go and decided to find a more gullible partner, GM, and shifted to an EV pick-up.

    Yeah, not very hard to see through unless all you were focused on was the rising stock prices.

  • avatar
    JMII

    Shocking. Sorry you knew the pun was coming but someone had to do it.

  • avatar

    Even short-term Barra eventually discovered Nikola is not a valid company. Has this company even produced a single vehicle that has been sold? A better name for them should be Ponzi motors.

  • avatar
    stuki

    Those who can, build. Trucks with competitive utility. At competitive prices.

    While those who can’t…, eh, do, like:

    “getting into the reverse merger with VectoIQ, a special purpose acquisition company (SPAC), as a way to make sure their IPO was swinging for the fences”

    instead……

    But hey, it’s America. In the financialized, hence dystopian, era. Where no wealth, at all, whatsoever, is earned. And where all is instead redistributed to rank nothings of the above kind. From productive people. By central banks. Without any exception. Whatsoever.

    Hence, unsurprisingly: Instead of being directed at building competitive trucks at competitive prices, “our” scarce resources and capital, is instead directed fully, 100%, by utter and abject retards on nothing but Fed welfare. And hence, directed towards the only things such illiterate garbage knows how to. As in:

    “getting into the reverse merger with VectoIQ, a special purpose acquisition company (SPAC), as a way to make sure their IPO was swinging for the fences”

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