The founder and executive chairman of Nikola Corp., Trevor Milton has voluntarily stepped down from the company less than 10 days after a damaging report from a short seller accused him of intricate fraud and unprecedented “level of deception” for a public company of Nikola’s size. Steven Girsky, the former General Motors executive who facilitated Nikola’s merging with VectoIQ to go public earlier this year, was appointed Chairman of the Board, effective immediately.
Milton founded the company in 2014 and brought fuel cell electric trucks into the spotlight with promises of innovative hydrogen-powered Class 8 semis with a range of 800 miles and an all-inclusive leasing plan that would provide the trucks, fuel and maintenance for about a $1 per mile. The average operating cost for a diesel truck is $1.82, according to 2018 American Transportation Research Institute data.
After going public in June, Nikola’s next big moment was on Sep. 8, with the announcement that GM would produce its Badger pickup truck, available with both FCET and battery-electric powertrains, as well as provide the fuel cells for Nikola’s Class 7 and 8 trucks. The Badger is expected in 2024. Nikola’s first commercial vehicle product, the battery-electric Tre, is slated to begin production through partner CNH Industrial in 2021 in Ulm, Germany at an Iveco plant.
On the engineering side, Bosch was one of Nikola's first partners, investing at least $100 million in Nikola and providing a large share of engineering support on the Nikola Two. Anheuser-Busch used this truck for a zero-emissions beer delivery and placed an order for 800 trucks. The company also has a partnership with Nel Hydrogen to create a national hydrogen fueling station network.
Two days after the GM news, Hindenburg Research published a lengthy and meticulously sourced screed levying dozens of charges against Nikola and Milton, personally. Many of the accusations refer to the development and marketing of the Nikola One prototype. The company rebuked some charges and the matter is now in the hands of the Security Exchange Commission, which is investigating both sides, as Hindenburg benefited from the stock slide following its report. The U.S. Department of Justice is believed to also have begun inquiries into the accusations.
To avoid further damage to Nikola’s reputation, Milton is moving on.
“Nikola is truly in my blood and always will be, and the focus should be on the Company and its world-changing mission, not me,” said Milton. “So I made the difficult decision to approach the Board and volunteer to step aside as Executive Chairman. Founding Nikola and growing it into a company that will change transportation for the better and help protect our world’s climate has been an incredible honor.
“As we move forward, I am confident Steve is the right leader to guide our vision at the Board level,” Milton continued. “In addition to being an early believer and supporter of Nikola, Steve has more than 30 years of experience working with OEM leaders, suppliers, dealers, labor leaders and national policy makers, and has served as a director of numerous public companies.”
Nikola’s stock on the Nasdaq, NKLA, immediately plummeted 27% upon news of Milton’s departure, before slowly climbing north again.
Girsky said: “On behalf of the Board, I want to thank Trevor for his visionary leadership and significant contributions to Nikola since its founding. Trevor saw the possibility of creating an end-to-end zero-emission transportation system when the industry was still in its nascent stages and took action to build the Nikola of today, with world-class partnerships, groundbreaking R&D, and a revolutionary business model. I know I speak for everyone at Nikola in our gratitude and in wishing him all the best.”
Nikola CEO Mark Russell stated: “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.”
Analysts have not been deterred by the Hindenburg report.
Equity research firm Cowen remains very high on the company:
The founder and Executive Chairman Trevor Milton is a self-confident, boastful and always in "sales mode" type of individual; however, in our view recognizes his weak points and surrounds himself by high quality partners to accelerate the time to market. We see Mr .Milton as overly aggressive in the positioning, specifics and timing of many of the variables he has discussed, but we don't see this as intentional deception, and we note Tesla has done this for years. Sure, pushing a truck down a hill to get that perfect video moment was inappropriate, but we note that was the Nikola One, a vehicle contemplated before the full partner ecosystem at Nikola was fully baked, is not intended to be commercialized and was replaced by the Two in '19 - investors have missed this. Since the Nikola World event in '19, the entire focus publicly of the company has been on the Nikola Two…
The report went on to say “our view [is] that Nikola is more of a ‘systems integrator’ than one with heavy IP. Now that the company has ample cash, the team is looking to improve upon the many things that partners helped innovate.”
Previously, JP Morgan on Sept. 14 also gave Nikola a vote of confidence:
“We think this core criticism is misconceived. We believe the ability to execute by leveraging other companies’ core competences – specifically GM, CNH and Bosch – is a major positive, not a negative. We also think speed, flexibility and unencumbered readiness to change course quickly with evolving circumstance in a fast-developing market are fundamental and desirable attributes of a disruptor.”
Here is the full text of Milton's farewell letter sent to Nikola employees:
I have had such a wonderful experience building Nikola and seeing each and every one of you hired. What started out in my basement with just a couple employees became a headquarters filled with over 400 diverse families.
Nikola is in my blood and always will be. You are part of that Nikola family and always will be part of mine as well.
I made the decision to approach the Board of Directors and volunteer to step aside from my roles as Executive Chairman and a member of the Board of Directors. The focus should be on the Company and its world-changing mission, not me. We have to keep our eye on the target and deliver without distractions. You have worked tirelessly toward Nikola’s goal of becoming the global leader in zero-emissions transportation, and I wanted you to hear about my decision directly from me. Thank you for sharing in my vision, and it has been an honor to work with you.
You are in good hands. Mark is incredible and was handpicked to be my successor from the beginning. Looking ahead, I am confident that Nikola has the right leadership group and dedicated team members to advance its mission.
I want to thank you all. I am working with Legal to make sure that the Company honors the set aside of 1,069,000 shares that were promised to you a few weeks back. Legal and HR will be providing documentation on how those are earned. Go grow that value and know I will forever cheer for you and your families.
My eternal gratitude to you all,
Trevor Milton
