Nikola EV truck fraud: End of the road for NKLA stock as founder is found guilty of deceiving investors?
By Jenal Mehta
10:56, 20 October 2022
Trevor Milton, founder of American electric vehicle producer Nikola Motor Company (NKLA), charged with fraud worth $1bn, has been been found guilty of misleading investors for his own personal benefit.
In 2020, after a report by Hindenberg Research accused Milton of “an intricate fraud”, the company lost more than 50% of its market value. This has also caused Nikola to lose out on valuable partnerships with the likes of General Motors (GM) and BP (BP).
Milton has since cut ties with the company and was formally indicted in 2021 by US federal protesters. Earlier this week Milton was found guilty of three out of the four counts he was charged with.
Nikola Motor Company (NKLA) Price Chart
Trevor Milton founded Nikola in 2015 and it went public in 2020. Like its rival Tesla (TSLA), Nikola Motor (NKLA) was also named in honour of Nikola Tesla, and holds similar ambition of making waves in the electrical vehicle market with a focus on electric trucks.
The indictment has only been for Milton himself, and not for the Nikola Corporation as a whole. Under the guidance of current CEO Mark Russell the corporation has been making significant investments in developing its vehicles with a positive impact on revenue. This has kept some analysts hopeful about Nikola's outlook.
What is your sentiment on NKLA?
Tesla (TSLA) share price chart
Trevor Milton found guilty
In 2020 Hinderberg Research published a report accusing Trevor Milton of misleading its investors, their research was based on whistleblowers and amateur investigators, much of which was discussed on Twitter (TWTR) under the hashtag of @insidenikola.
The US Securities and Exchange Commission (SEC) and Department of Justice (DoJ) began formally investigating Milton in 2021 and charged him in June of that year.
By this time Nikola stock had fallen more than 50% and had lost a number of potential partnership deals. General Motors decided against investing in the company, and BP backed out of co-developing fuelling stations.
In October 2022, Milton was found guilty on one count of securities fraud and two counts of wire fraud. He will be sentenced in January.
Future of Nikola
Since CEO Mark Russell took the place of Milton In 2020 the company has made several significant investments.
In 2021 the company invested $50m in a hydrogen factory aimed at fuelling its semi electric trucks. The company also announced the opening of new dealerships across multiple states in the US.
In 2022 Nikola announced it will be acquiring Romeo Power, a battery making company. The company has met its delivery targets for the recent quarter and grew its revenue from -$694m to $18m.
Danni Hewson, AJ Bell financial analyst, commented: “The fact that Nikola is now making trucks and getting them out to dealers will foster confidence that the business has finally found a higher gear, and though the number wasn’t quite at forecast levels, it was only a couple away, and the full year target remains unchanged.
“Shareholders have taken a stake in the business because they are excited about the direction of travel and there’s plenty in the outlook to tantalise, not least finalised plans to site three hydrogen refuelling stations in California ready for the sign off of its hydrogen fuel cell truck prototype.”
Regarding the past concerns she added: “If production successfully ramps up as promised and if it attracts buyers for its trucks who are happy with the performance, then past issues will be forgotten very quickly.”
Markets in this article
Related topics
