Founder of GM Electric Truck Partner Quits Amid Allegations
FRANKFURT, Germany—Shares in electric and hydrogen-powered truck startup Nikola plunged on Sept. 21 ..
FRANKFURT, Germany—Shares in electric and hydrogen-powered truck startup Nikola plunged on Sept. 21 after the companys founder resigned amid allegations of fraud—just two weeks after signing a $2 billion partnership with General Motors.
The company said late on Sept. 20 that Trevor Milton resigned and the departing executive chairman said he would defend himself against accusations that the company made false claims about its vehicles, allegations Nikola rejects.
Milton said in a message to Nikola employees that he was stepping aside because “the focus should be on the company and its world-changing mission, not me.”
Shares in the company, based in Phoenix, Arizona, tumbled 17 percent as markets fell broadly on Sept. 21. Shares of GM fell 5.2 percent. A report from Hindenburg Research from Sept. 10 said Nikolas success was “an intricate fraud” and based on “an ocean of lies,” including a video showing a truck rolling downhill to give the impression it was cruising on a highway, and stenciling the words “hydrogen-electric” on the side of a vehicle that was actually powered by natural gas.
Hindenburg said it had taken a short position in Nikola stock, which means it could profit if the stock goes down.
Nikola said it contacted the Securities and Exchange Commission, which is looking into Hindenburgs allegations. News reports have said the U.S. Justice Department is investigating as well.
In a prepared statement, Nikola said the Hindenburg report was “replete with misleading information and salacious accusations directed at our founder and chairman” and that Nikola had hired an attorney to evaluate potential legal recourse. It has said the video didnt describe the vehicle as moving under its own propulsion and that the company does have working trucks.
Under the partnership announced with GM, the Detroit-based automaker would take an 11 percent ownership stake in Nikola and would engineer and build Nikolas Badger hydrogen fuel cell and electric pickup truck. GM said in a statement on Sept. 21, “We acknowledge Trevor Miltons departure from Nikola and the decision of the Nikola board to move forward.”
GM said it would go ahead and close the agreed transaction “to seize the growth opportunities in broader markets” with its fuel cell and battery systems, and confirmed it would build the Badger.
In exchange for the 10-year deal, GM was to get $2 billion worth of Nikolas newly issued common stock that will come in three increments through 2025. The deal gives GM another revenue stream for its hydrogen fuel cell, battery, and electric vehicle research, positioning the company as a supplier to others who want to enter the market. It also helps to defray some of the huge capital costs of developing new technology.
GM CEO Mary Barra said last week that GM has worked with a lot of partners before, and a “very, very capable team has done the appropriate diligence” on the Nikola deal.
Guidehouse Insights Principal Analyst Sam Abuelsamid said he doubts that GMs pursuit of partners led it to overlook potential shortcomings at Nikola. Auto companies, he sRead More – Source