The trial of Trevor Milton, the founder of electric truckmaker Nikola Motor accused of fraud and securities fraud, has begun. Prosecutors allege Milton exaggerated the company’s technology which led to huge losses for investors in Nikola’s stock as it collapsed.
In 2020, Nikola’s market cap briefly surpassed that of Ford, as investors rushed for a piece of the company labeled the Tesla of the trucking industry. But shares plummeted when reports suggested Milton had made false claims about the technology, including producing a video showing a truck made to roll down a hill to make it look like there was a working prototype.
The trial is expected to last four or five weeks and Milton, who resigned following the reports, has pleaded not guilty.
Last year Nikola agreed to pay a civil penalty of $125 million to settle an SEC investigation into fraud but did not admit any wrongdoing as part of the agreement.
Amid the controversy, the company has continued to struggle. Nikola reported a net loss of $173 million for the second quarter of this year, on sales of $18 million. Shares have traded around the $5.40 mark recently, way down from their record high of almost $66 in June 2020.
Nikola went public through a merger with the special purpose acquisition corporation (SPAC) VectoIQ Acquisition in 2020. The company was one of a number of electric vehicle manufacturers that went public through a SPAC around that time but quickly became a cautionary tale.
The indictment against Milton lists numerous examples which prosecutors allege show him making public statements which were not true. In 2020, according to the indictment, he said Nikola was building a new pickup, known as the Badger, using its own technology. But prosecutors say the technology came from third party companies, and a prototype was built using parts from Ford F-150 pickups, the same trucks Milton claimed the Badger would vanquish.
On another occasion, Milton reportedly claimed the Badger would have a drinking fountain which used waste water from the truck’s hydrogen fuel cell. He had not discussed this with his engineers prior to that claim, and apparently later searched on the internet to establish it was feasible, which it wasn’t.