Nikola Corp. has agreed to pay $125 million to settle charges levied by The Securities and Exchange Commission (SEC) that the company actively defrauded investors by providing misleading information about its technical prowess, production capabilities, and general prospects.
The settlement comes after a salvo of civil and criminal charges were launched against Nikola’s founder Trevor Milton, who got in trouble for convincing investors that the prospective automaker had fully functional prototypes boasting technologies other companies would have envied when that wasn’t actually the case. Milton was chided for using social media to promote false claims about the business, with his pleading not guilty to fraud charges brought up by the Department of Justice in July.
He also got out of the company shortly after the Hindenburg Research report that nuked the company’s stock prospects was released in September of 2020. The paper criticized the company for having largely fabricated the technologies it was trying to promote and framed Milton as a career fraud. As you can imagine, this didn’t do much for its stock valuation — which was already dropping at the time. Despite having been able to move shares at $65 in June of 2020, Nikola shares are now hovering around $9 apiece.
The Justice Department was upset that Milton managed to get away with tens of millions of dollars as a result of the alleged misconduct. The trial is currently ongoing with Nikola’s founder having failed to get the case dismissed or moved. However, the details of that case have made their way over to the SEC, which used them to help establish a timeline. The agency has alleged that Milton embarked on a public relations campaign aimed at maintaining Nikola’s then-inflated stock price using false claims about technological milestones and product capabilities that convinced investors to lay down their money.
According to Reuters, the SEC is using this as its central argument against the company and is part of the agency’s forthcoming crackdown on companies using special-purpose Acquisition companies (SPACs) to pump stocks and falsified information to lure in unwitting investors.
Milton’s misleading statements aimed at inflating share prices began even before Nikola had produced a “single commercial product or had any revenues from truck or hydrogen fuel sales,” the SEC order said.
Nikola, which did not admit or deny the SEC’s findings, has agreed to cooperate with ongoing litigation and investigation, the SEC said. The company previously disclosed expectations of the hefty penalty in November.
Nikola “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,” Gurbir Grewal, the SEC’s enforcement director, said in a statement.
Nikola said in a statement that it will continue to execute on its strategy and expand its manufacturing network. The company is seeking reimbursement from Milton for “costs and damages in connection with the government and regulatory investigations,” it said.
The company’s current CEO, Mark Russell, said that Nikola anticipated paying a $125 million penalty to the SEC under a proposed deal to settle civil fraud charges in November. It will also be seeking reimbursement from Milton for costs and damages in connection with the government and regulatory investigations.
Become a TTAC insider. Get the latest news, features, TTAC takes, and everything else that gets to the truth about cars first by subscribing to our newsletter.