Nikola admits to making “inaccurate” statements under disgraced founder

Budding electric truck maker Nikola admitted to the Securities and Exchange Commission that nine statements made by founder Trevor Milton were “inaccurate.” Milton was forced to resign Nikola in September, shortly after the lies were discovered.

Between 2016 and 2020, Milton told a string of whoppers about his very young truck maker. At a press event in 2016, Milton took the stage to unveil a prototype of the company’s first truck, dubbed the Nikola One. During the event, Milton claimed that the truck “is fully functioning”. In fact, Nikola never pushed the truck forward on her own.

Nikola’s most infamous flimflam happened in 2018, when the company released a video of the Nikola One “on the move”. In fact, Nikola had towed the broken down truck to the top of a long, shallow slope and rolled it down, tilting the camera so that it looked like it was driving on level ground.

These and several other inaccuracies came to light in September after a short-selling company called Hindenburg Research released a report declaring Nikola to be “massive fraud.” In response, Nikola tasked the Kirkland and Ellis law firm to investigate Hindenburg’s claims. Although the resulting report has not been made public, Nikola has now faced nine inaccurate statements prior to Milton’s departure in September 2020. They include:

• “In July 2016, the company declared that it had rights to the natural gas wells and in August 2016 that the wells were being used as a reserve for solar hydrogen production.”
• “In April 2019, Milton said solar panels installed on the roof of the company’s head office were producing around 18 megawatts of energy per day.”
• “In December 2019 and July 2020, Milton said the company ‘could produce’ over 1,000 kg of hydrogen at the company’s demonstration stations and that the company was ‘below’ $ 3 / kg at this. moment “
• “In July 2020, Milton said that ‘all major components are done in-house'”

Nikola now admits that these statements “were inaccurate in whole or in part when they were made”.

Nikola says Kirkland and Ellis did not decide whether the company violated any laws when it made these inaccuracies. The firm’s investigation is ongoing.

Nikola says he could still face serious legal consequences for these inaccuracies. Federal prosecutors and the Securities and Exchange Commission both took an interest in the situation last September. Nikola says he can’t predict how these investigations will turn out. Nikola incurred $ 8 million in legal fees under an indemnity agreement with Trevor Milton.

Nikola tries to get past Trevor Milton

At the same time, Nikola argues that the main thesis of the Hindenburg report – that Nikola was a “massive fraud”, is not correct. Milton was really trying to build a viable hydrogen trucking business, but in an incompetent way. Although he overstated Nikola’s abilities, he also hired experienced engineers to work on his products. Before he left, Milton made deals with companies that really know how to design and build trucks.

So, as Nikola’s new leadership attempts to move beyond Milton’s antics, they have pursued the most promising aspects of the founder’s strategy. Indeed, when releasing its quarterly financial results this week, Nikola said it has completed assembly of five prototypes of its Nikola Tre battery-powered electric truck in partnership with IVECO, an Italian truck maker. Nikola says he is working with IVECO to build a manufacturing plant in Germany, with trial production scheduled to begin in June. Nikola is also building a truck plant in Arizona that she hopes to start manufacturing trucks later this year.

Nikola says he will get the trucks into the hands of customers before the end of the year. In a conference call Thursday, the company said there was still strong demand for its battery-powered electric trucks.

Nikola also said that its hydrogen-powered electric trucks are on track for a 2023 release date. The company recently announced an electricity supply agreement with an Arizona electric utility that will help Nikola to produce low cost hydrogen for its planned network of hydrogen fuel stations.

Nikola was able to secure a floor price for electricity because hydrogen production can be suspended during hot summer afternoons. This is valuable for electric utilities because they have to spend a lot of money to ensure they have sufficient capacity during peak periods. A customer who commits to zero energy consumption during peak periods adds very little to the cost, resulting in a good deal. Nikola says he hopes to secure similar deals in other states.

In short, Nikola’s new management is really trying to make Nikola a viable truck business. They’ve ditched the more ridiculous parts of Milton’s vision – like the Badger van – and are focusing on the more viable aspects.

But time is running out. Nikola lost almost $ 150 million in the fourth quarter of 2020 and has $ 840 million in the bank. The company will therefore have to raise more money before too long. And for that to happen, company executives need to convince investors that they put Milton’s chicanery in the past and are now running a normal business with a viable business strategy. We don’t know if they will succeed. But they are trying.