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Nikola founder confronts charges he lied to support stock

Chris Dolmetsch and Ed Ludlow, Bloomberg News on

Published in Automotive News

“For example, on June 25, 2020, Milton sent a series of tweets from his personal account in which he claimed that Nikola would offer a drinking fountain in the Badger. This information came as a complete surprise to Nikola’s designers, engineers, and marketing personnel. When informed of the tweets, one engineer questioned whether ‘this [is] a joke,’ a marketing employee wrote that his ‘head is fuzzy,’ and a designer texted, ‘[u]hhhhh what.’ ”

Among the false and misleading statements Milton made, according to the federal indictment:

—That the company had a “fully functioning” semi-truck prototype known as the “Nikola One,” despite the fact that Milton knew that the prototype was inoperable

—That Nikola had engineered and built an electric- and hydrogen-powered pickup truck known as “the Badger” from the “ground up” using Nikola’s parts and technology, which he knew was not true

—That Nikola was producing hydrogen and was doing so at a reduced cost, when “no hydrogen was being produced at all by Nikola, at any cost”

—That Nikola had developed batteries and other important components in-house, when they were buying them from third parties

—That reservations for Nikola’s vehicles were binding orders representing billions in revenue, when they were actually able to be canceled at any time “and were for a truck Nikola had no intent to produce in the near-term”

Production Progress

Beyond Nikola’s technology, Milton and other executives’ statements contained discrepancies and exaggerations about the company’s progress towards production.

 

In July 2020, Milton tweeted that construction would start on the company’s Coolidge, Arizona plant just days after groundbreaking. This followed a comment by Nikola’s Head of Global Manufacturing Mark Duchesne, who told reporters on July 22 that construction would start the following day. However, this would not have been possible because Nikola only held a “temporary use” permit that allowed for limited ground clearing and safety measures to facilitate the groundbreaking event. It did not have the required permits to start construction, Bloomberg reported.

In a similar stretching of words, Milton told a podcast that month that its European partner Iveco was already producing vehicle prototypes that were “coming off the assembly line right now in Ulm, Germany.” This was echoed by the company’s chief executive officer Mark Russell on an Aug. 4 on an earnings call where he stated that the prototypes were “coming off the end of the facility at this point.”

While prototypes were being made in Germany, Bloomberg reported in September that the assembly line was not in fact operable and the facility was still under construction, two months after Milton’s original statement. The prototypes were being built by hand in a nearby workshop on the site, not on the assembly line. On Thursday, Nikola sent out an invitation to its opening ceremony for the Ulm facility on September 15.

EV Startup Scrutiny

Nikola was among the first EV startups that attracted attention from investors last year as a possible rival to market leader Tesla Inc., but not the last to draw scrutiny from the SEC.

Lordstown’s boasts about non-binding orders gave way to another attack by Hindenburg Research, which leveled accusations similar to the ones aimed at Nikola — that Lordstown had misled investors. Its founder stepped down in June, and the company confirmed this month that it is being probed by the Justice Department and the SEC.

Canoo rattled the market in March by announcing a hard pivot in its business plans to de-emphasize parts of its original pitch to investors. Its co-founder and CEO resigned in April, and in May the company disclosed an SEC investigation.

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