Trevor Milton arrested!
Trevor Milton arrested!
Trevor Milton, the founder of Nikola, has been charged with fraud. He “lied about nearly every aspect of the business” in order to drive investor demand for Nikola stock, say prosecutors. CHARLEEN CLARKE explains what happened in the lead-up to his arrest.
Nikola – the designer and manufacturer of zero-emission battery-electric and hydrogen-electric vehicles – and its founder, Trevor Milton, have been hitting the headlines of late. For all the wrong reasons. Why? Does this mean that its trucks are doomed?
Day of big drama
The drama all began on September 10 last year, when a company that specialises in forensic financial research called Hindenburg Research published a damning report entitled “Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America”.
The report, which makes fascinating reading, contains a number of very serious allegations, made after Hindenburg gathered extensive evidence, including “recorded phone calls, text messages, private emails and behind-the-scenes photographs”.
Most allegations concern Trevor Milton, the billionaire who founded the company, with Hindenburg stating that “Nikola is an intricate fraud built on dozens of lies over the course of its Founder and Executive Chairman Trevor Milton’s career… We have never seen this level of deception at a public company, especially of this size,” the report noted.
Startling claims
These are some of Hindenburg’s most startling claims:
- Milton misled partners into signing agreements by falsely claiming to have extensive proprietary technology.
- The 2018 “Nikola One in Motion” video – which showed the semi-truck driving on a road at a high speed – was an elaborate ruse. Nikola had the truck towed to the top of a hill on a remote stretch of road and simply filmed it rolling down the hill.
- Milton appointed his brother, Travis, as Director of Hydrogen Production/ Infrastructure to oversee this critical part of the business. Travis’s prior experience appears to have largely consisted of pouring concrete driveways and doing subcontractor work on home renovations in Hawaii.
“Dozens of outright lies”
Hindenburg also accused Milton of “dozens of outright lies”. The first pertains to the production of inexpensive hydrogen, which is fundamental to the success of Nikola’s business model. “Milton has claimed in a presentation to hundreds of people and in multiple interviews to have succeeded at cutting the cost of hydrogen by 81% compared to peers and to already be producing hydrogen. Nikola has not produced hydrogen at this price or at any price, as he later admitted when pressed by media,” the report notes.
Milton claimed that Nikola’s headquarters has 3,5 megawatts of solar panels on its roof producing energy. “Aerial photos of the roof and later media reports show that the supposed panels don’t exist,” Hindenburg reported.
Finally, in a July 2020 podcast, Milton said of Nikola’s Tre truck: “We have five of them coming off the assembly line right now in Ulm, Germany.” In reality, the five trucks were being built and commissioned in Ulm. They were pre-production builds. “None has come off the assembly line,” a source in Germany said at the time.
Nikola refutes allegations
On September 11, Nikola refuted these allegations. “Yesterday, an activist short-seller whose motivation is to manipulate the market and profit from a manufactured decline in our stock price published a so-called ‘report’ replete with misleading information and salacious accusations directed at our founder and executive chairman. To be clear, this was not a research report and it is not accurate. This was a hit job for short-sale profit driven by greed,” it said in a statement.
On September 14, Nikola issued a more detailed statement, setting the record straight on the “false and misleading short-seller report”. Milton had done nothing wrong – or so it seemed.
Shock resignation
On September 20, Nikola announced that Milton would “voluntarily step aside as Executive Chairman and from the Board”. Stephen Girsky, former Vice Chairman of General Motors and a member of Nikola’s Board, was appointed Chairman of the Board, effective immediately. “The focus should be on the Company and its world-changing mission, not me,” Milton tweeted at the time. “I intend to defend myself against false allegations leveled (sic) against me by outside detractors.”
What’s next?
So, Milton is gone from the trucking industry if not from the headlines (we assume he’s chilling on the 2 000-acre ranch in Utah that he bought recently for a whopping $32,5 million). Also gone is his enormously entertaining Twitter account (which saw many a ding-dong battle with his nemesis, Elon Musk). What’s next for Nikola?
Well, it’s being investigated by various government agencies. But Mark Russell, Nikola’s chief executive officer, says it is business as usual. “We remain committed to delivering on our objectives and creating value for our shareholders. Along with the rest of the management team, I will continue to work closely with Steve and the Board to advance Nikola’s vision for the future. Our priorities remain unchanged and, in collaboration with our partners, we are laser-focused on executing on our strategic initiatives and laying the groundwork to become a vertically integrated zero-emissions transportation solutions provider.”
Nikola has also distanced itself from the arrest of Milton. It issued this statement: “Trevor Milton resigned from Nikola on September 20, 2020, and has not been involved in the company’s operations or communications since that time. Today’s government actions are against Mr Milton individually and not against the company. Nikola has cooperated with the government throughout the course of its inquiry. We remain committed to our previously announced milestones and timelines and are focused on delivering Nikola Tre battery-electric trucks later this year from the company’s manufacturing facilities.”
Projects on track
So, where to next? Practically, many of Nikola’s projects appear to be on track. According to a statement by the company, the Nikola Tre will be ready for production and available to customers by the fourth quarter of this year. Nikola will begin sales of the Nikola Two, a hydrogen-electric powered semi-truck for the medium and long-haul trucking sectors, in 2024. The exact status of the controversial Badger is unknown, but General Motors (which was producing the bakkie with Nikola) has bailed from the project.
Right now, Milton may or may not have fallen from grace. But, assuming that these projects do come to fruition, his impact on the automotive industry will be felt for many years to come.
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