Enlarge /. A prototype of the Nikola Tre battery electric vehicle.
Up-and-coming electric truck manufacturer Nikola has admitted to the Securities and Exchange Commission that nine statements by founder Trevor Milton were "inaccurate". Milton was forced to resign from Nikola in September shortly after the untruths first came to light.
Between 2016 and 2020, Milton told a number of Whoppers about his fledgling truck manufacturer. At a press event in 2016, Milton took the stage to unveil a prototype of the company's first truck, the Nikola One. During the event, Milton claimed that the truck was "fully operational". In reality, Nikola never got the truck to move on its own.
Nikolas most notorious flimflam came in 2018 when the company released a video of the Nikola One "on the move". In reality, Nikola had towed the inoperative truck up a long, flat incline and rolled it down, angled the camera so it looked like it was driving on level ground.
These and several other misstatements came to light in September after a short-selling firm called Hindenburg Research published a report classifying Nikola as a "massive fraud". In response, Nikola hired the Kirkland and Ellis law firm to investigate Hindenburg's allegations. Although the resulting report was not made public, Nikola made nine inaccurate statements prior to Milton's departure in September 2020. They include:
- "In July 2016, the company announced that it had rights to natural gas wells and in August 2016 that the wells were being used as a backup for solar hydrogen production."
- "In April 2019, Milton stated that solar panels on the roof of the company headquarters produce approximately 18 megawatts of energy per day."
- "In December 2019 and July 2020, Milton stated that the company can" produce "over 1,000 kg of hydrogen at the company's demo stations and that the company was below $ 3 / kg at the time."
- "In July 2020, Milton stated that & # 39; all major components are manufactured in-house & # 39;"
Nikola now admits that these statements were "wholly or partially inaccurate when they were made".
According to Nikola, Kirkland and Ellis did not determine whether the company was breaking the law when it made those false statements. The investigation into the company is still ongoing.
Nikola says there could still be serious legal ramifications for this misstatement. The federal prosecutor's office and the Securities and Exchange Commission both took an interest in the situation last September. Nikola says it can't predict how these investigations will turn out. Nikola incurred legal fees of $ 8 million under a compensation 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 incorrect. Milton was really trying to build a viable hydrogen truck business, albeit incompetently. While wildly exaggerating Nikola's skills, he also hired experienced engineers to work on his products. Before leaving, Milton signed contracts with companies that really know how to design and build trucks.
As Nikola’s new management seek to overcome Milton's antics, they have pushed forward the most promising aspects of the founder's strategy. When Nikola released its quarterly results this week, it announced that it had completed the assembly of five prototypes of its Nikola Tre battery electric vehicle in partnership with IVECO, an Italian truck manufacturer. Nikola says it is working with IVECO to set up a manufacturing facility in Germany. Test production is scheduled to begin in June. Nikola is also building a truck factory in Arizona, which hopefully will start manufacturing trucks later this year.
Nikola says trucks will be in the hands of customers before the end of the year. In a conference call on Thursday, the company said that demand for battery-electric trucks remains strong.
Nikola also said its hydrogen electric vehicles are on track for the planned 2023 release date. The company recently announced a utility contract with an Arizona utility that will help Nikola produce low-cost hydrogen fuel for its proposed network of hydrogen refueling stations.
Nikola was able to achieve a rock-bottom price for electricity because hydrogen production can be stopped on hot summer afternoons. This is valuable to electricity suppliers as they have to spend a lot of money to make sure they have enough capacity during times of high demand. A customer who pledges not to use electricity in times of high demand has very low costs, so he can make a lot of money. Nikola hopes to do similar deals in other states.
In short, Nikola’s new management is really trying to make Nikola a viable trucking company. You've thrown off the most ridiculous parts of Milton's vision – like the Badger pickup – and are focusing on the more viable aspects.
But the clock is ticking. Nikola lost nearly $ 150 million in the fourth quarter of 2020 and has $ 840 million in the bank. So the company will soon have to raise more money. And to do that, the company's executives must convince investors that they have used Milton's harassment in the past and are now running a normal company with a viable business strategy. It's not clear if they'll make it. But they try.