Shares of electric truck start-up Nikola (NKLA) sank sharply on Monday, following the overnight resignation of executive chairman and founder Trevor R. Milton, who has been fending off accusations of fraud by a large investor betting against the company.

The stock, traded on the Nasdaq, tumbled by over 30% at Wall Street’s opening bell on Monday, but clawed back some of those losses in midday trading.

Nikola has been under pressure for more than a week, after activist short-seller Hindenburg Research issued an extensive report on Sept. 10 claiming Nikola “is an intricate fraud built on dozens of lies” over the course of Milton’s career. In that report, the short-seller raised 53 questions for the company. Hindenburg’s accusations have sent the company — once one of this year’s hottest stocks — reeling, and put Nikola under a regulatory microscope.

For those reasons, Milton asked the company to allow him to step down, he wrote in a Twitter post early Monday.

“The focus should be on the Company and its world-changing mission, not me. I intend to defend myself against false allegations leveled against me by outside detractors,” he added.

For its part, Nikola has denied the accusations as “false and defamatory” — and blasted Hindenburg’s move as “financially motivated to manipulate the market and profit from a decline” in Nikola’s share price.

It’s unclear whether Hindenburg’s accusations are legitimate, but the market action appears to be playing right into the firm’s hands. Nikola is now trading at a fraction of its 52-week highs near $94 — the spike high hit in June after the company engineered a successful reverse merger.

Last week, Bloomberg reported that the Securities and Exchanges Commission (SEC) is probing Hindenburg’s claims. Nikola said in its response that it contacted the SEC and “intends to fully cooperate” with its inquiry. The Justice Department is also making an inquiry, according to a Financial Times report.

Shortly after Nikola’s response, Hindenburg Research, which pointed out that the company answered 10 of its 53 questions, characterized the company’s rebuttal as “a tacit admission of securities fraud.”

In response to Milton’s resignation on Monday, Hindenburg Research tweeted: “We think this is just the beginning.”

In an 8-K filing with the Securities and Exchange Commission on Monday, Nikola said Milton offered to voluntarily step down from his position as executive chairman, board director, and all positions as an employee and officer in the company and its subsidiaries and after deliberation the board accepted.

The company noted that Milton will remain an “unpaid consultant” and “will be making himself reasonably available to provide consulting services” and to assist Nikola as “reasonably requested” by the board through the end of 2020. 

The filing noted that Milton has agreed to relinquish 100% of the 4.859 million performance-based stock units granted on Aug. 21 and any right to enter into a two-year consulting agreement with an annual fee of $10 million. 

For three years, Milton agreed to not purchase more than 19 million shares of the company’s outstanding common stock, propose any extraordinary transaction related to the company, solicit any proxy for election or removal of directors to the board, seek representation on the board, or submit a stockholder proposal. 

Milton holds 91.64 million shares, or a 24.18% stake in the company, according to Bloomberg data.

According to the agreement between Nikola and Milton, those 91.64 million shares are held by M&M Residual LLC and include 6,005,139 shares “subject to options held by certain employees pursuant to a Founders Stock Option Plan.” 

As part of the agreement, the company committed to paying for “reasonable costs of a security inspection” of Milton’s residence and said it will reimburse him for up to $100,000 for a full-time security detail for three months. 

Milton also agreed to “fully cooperate” with Nikola in investigating, defending, or prosecuting any claim. Nikola will also pay or reimburse Milton for all out-of-pocket expenses incurred during this process, the document shows.

As for social media, Milton agreed to “promptly revise” his employment status on social media platforms, including LinkedIn so that he is “no longer identified as holding any position” with Nikola or serving on its board. Before posting about the company or its employees, Milton agreed to consult with his attorney and Nikola’s chief legal officer.

In the company’s 10-Q report issued on Aug. 4, Nikola said it’s “highly dependent” on the services of Milton.

“We are highly dependent on the services of Trevor R. Milton, our Executive Chairman, and largest stockholder. Mr. Milton is the source of many, if not most, of the ideas and execution driving Nikola. If Mr. Milton were to discontinue his service to us due to death, disability or any other reason, we would be significantly disadvantaged,” the 10-Q report said.

Yahoo Finance reached out to Nikola for further comment.

Stephen Girsky, a former vice chairman of General Motors and Nikola board member, has been appointed Nikola’s chairman, effective immediately.

Shares of Nikola were last trading down 28.83%, or $9.69, near $24.50 on Monday before the market open. 


 Julia La Roche is a Correspondent for Yahoo Finance. Follow her on 
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