Electric truckmaker Nikola, which has been under investigation for over a year because of fraud accusations against departed founder Trevor Milton, says it has a tentative agreement to resolve the matter by paying $125 million to the Securities and Exchange Commission. The company is also seeking reimbursement for the fine and legal costs from Milton, still its biggest shareholder.
Final approval of the settlement—which may be paid over the next two years—will be determined with a vote by the SEC’s commissioners, the Phoenix-based company said today in its third-quarter results announcement. Nikola also filed an arbitration claim against Milton in an effort to recover damages it has sustained.
“We have reserved the amount that reflects our best estimate of the civil penalty at this time and we anticipate it will be paid in installments over a two-year period,” CEO Mark Russell tells Forbes. “We're looking forward to bringing it to a close with this potential settlement so we can continue to focus on the real work that we have to do.”
Scrutiny of Nikola by federal officials, starting in September 2020 when fraud allegations against Milton arose, has kept a cloud over its plans to shake up the trucking industry with a line of high-tech electric trucks powered by batteries and fuel cells, as well as the hydrogen and fuel stations needed to keep them rolling. After an early share-price surge following its June 2020 public listing, Nikola shares saw a precipitous drop after founder Milton was accused of and later indicted for allegedly lying about the company’s technology and market readiness. He resigned as executive chairman in September 2020.
Milton, who currently owns approximately 64 million shares, pleaded not guilty to federal criminal fraud charges in July. His attorneys didn’t immediately respond to a request for comment. No other Nikola executives have been charged with wrongdoing.
A fine of $125 million is significantly larger than past punishments doled out by the SEC against companies and executives for making false statements to investors. For example, in 2018 the regulator fined Elon Musk and Tesla $20 million each after the mercurial CEO falsely claimed on Twitter he had secured funding to take the company private. Musk also lost his position as Tesla’s board chairman, but was otherwise relatively unscathed.
Nikola shares rose more than 13% to $14.45 in early Nasdaq trading on Thursday.
Separately, the company said it expects to get up to 25 of its first battery-powered Tre semi-trucks to U.S. customers before the end of 2021. Nikola is investing heavily in its truck technology, including a new assembly line in Ulm, Germany, with industrial partner Iveco and its new Coolidge, Arizona, factory that will start building vehicles in 2022.
As a result, it reported no revenue for the quarter that ended September 30 and expects to report only up to $7 million in 2021’s final quarter. The net loss for the quarter was $267.3 million, or 68 cents a share.
In September the company raised an additional $300 million in a stock purchase deal with Tumim Stone Capital, in addition to a similar $300 million raise Tumim earlier in the year. Under Russell, Nikola also began securing new partnerships to execute its business plans, including deals with pipeline developer TC Energy for large-scale hydrogen production and distribution and OPAL Fuels to develop and build hydrogen fuel stations.
“What’s important is getting this behind us,” Russell says of the SEC investigation. “We've worked very hard in the last year to make sure that it doesn't distract us from what we have to do day-to-day. Having it behind us will make it that much easier to focus on what really matters.”
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November 04, 2021 at 08:00PM
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Nikola To Pay $125 Million Fine To Settle Trevor Milton's Alleged SEC Violations - Forbes
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