Electric Truck Maker Nikola to Pay $176 Million in SEC Settlement Following Fake Demo

Electric Truck Maker Nikola to Pay $176 Million in SEC Settlement Following Fake Demo
Image: Nikola Corporation

GM-backed eclectic truck maker Nikola (which famously admitted one of its promotional videos was actually just a prototype rolling down a hill) will pay the Securities and Exchange Commission $US125 million ($176 million in Aussie dollars) to settle charges it had defrauded its investor by lying about its products and technical capability.

The settlement arrives a little more than one year after the SEC reportedly began its investigation into the company over allegations the company had deceived investors about its business practices, and nearly five months after the agency formally charged former Trevor Milton of violating anti-fraud protections. Milton was himself indicted by a federal grand jury this summer with three counts of criminal fraud.

In a statement, the SEC accused Nikola of orchestrating an expansive public relations campaign that meant inflating its stock price before its products were ever ready for development.

“The order also finds that Nikola further misled investors by misrepresenting or omitting material facts about the refuelling time of its prototype vehicles, the status of its headquarters’ hydrogen station, the anticipated cost and sources of electricity for its planned hydrogen production, and the economic risks and benefits associated with its contemplated partnership with a leading auto manufacturer,” the SEC said.

Specifically, the SEC alleged Nikola violated the antifraud and disclosure control provisions of the federal securities laws. The agency has also previously taken issue with Milton’s active presence on social media, where he directly contacted investors and allegedly fed them misleading information.

“Having chosen to promote Nikola through social media, Milton was obligated under the securities laws to communicate completely, accurately and truthfully,” SEC’s Division of Enforcement Director Gurbir S. Grewal said in July. In its own statement, Nikola (which will neither admit nor deny the SEC’s charges as part of the settlement) said it’s “pleased to bring this chapter to a close.” Nikola also said it would continue to cooperate with the SEC on another open investigation, which the New York Times notes may be a reference to separate litigation against Milton.

Like many recent electric vehicle companies, Nikola received a cascading wave of hype early on in its life. To put that in perspective, at one point, the company was valued at $US26 ($37) billion despite not bringing in any revenue. Founder Trevor Milton’s vision for the company was so powerful that it even managed to earn the backing of old guard carmakers, like GM, which took a $US2 billion ($3 billion) stake in the company before it had ever sold a single car. But much of that hype may have been more aspirational than real.

Milton was forced to resign from his position as chairman and CEO of the company last year following a report by investment fund Hindenburg Research that accused him of overstating Nikola’s technological ability. (For what it’s worth, Hindenburg is a short-selling firm that stood to gain from Nikola’s plummeting stock). At the time, Nikola had fervently denied the allegations in the Hindenburg Research report as, “false and misleading.” Among other things, the report also claimed Nikola relied on components sourced from other suppliers despite telling investors it used its own proprietary technology.