Nikola founder Trevor Milton is stepping down as executive chairman of the US electric truckmaker, capping a tumultuous 10 days for the company after a short-seller alleged it was an “intricate fraud”.
Stephen Girsky, a former vice-chairman of General Motors and a Nikola board member, will take over as chairman, the company said on Monday.
Mr Milton’s exit follows a bruising period for Nikola after a report from short-seller Hindenburg Research claimed to have “extensive evidence” that the group’s proprietary technology was purchased from another company.
Shares in Nikola, already down heavily over the past week, fell almost 30 per cent in early trading on Wall Street on Monday. Mr Milton remains Nikola’s largest shareholder, owning roughly a quarter of its stock.
Mr Milton agreed to forgo $166m in stock awards tied to the company’s performance, as well as $20m in consulting fees his contract entitled him to had he left involuntarily, according to Securities and Exchange Commission filings later on Monday. However, the company is covering a $100,000 security detail for him and his family for the next three months.
Nikola is requiring Mr Milton to “promptly revise [his] employment status on social media”, according to the filings, and also to run any potential postings mentioning the manufacturer past its lawyers first.
Mr Girsky thanked Mr Milton for his “visionary leadership and significant contributions to Nikola since its founding” and said Nikola had “world-class partnerships”, including with GM.
Nikola, which in June went public through a special purpose acquisition vehicle that avoids some of the scrutiny of a traditional initial public offering, has promised to “revolutionise” trucking and battery technology.
Mr Milton said on Monday that “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”. As a result, “I made the difficult decision to approach the board and volunteer to step aside as executive chairman”, he added.
The report from Hindenburg also raised questions about past businesses run by Mr Milton, several of which were mired by lawsuits or had collapsed.
In a separate letter to employees, Mr Milton wrote that he intended “to defend myself against false allegations levelled against me by outside detractors”.
Several of Nikola’s partners, including GM, on Monday pledged to continue working with the company.
GM said it “will work with Nikola to close the transaction we announced nearly two weeks ago” selling Nikola its hydrogen and battery systems while engineering and building the company’s Badger pick-up truck. Nel, a Norwegian company that sells parts to Nikola for use in hydrogen stations, insisted that its willingness to work with Nikola was “unchanged”.
Hindenburg, which has disclosed that it is betting against Nikola shares, said on Monday that GM “should carefully evaluate the potential long-term damage to its 112-year brand” from the Nikola deal, and said the start-up’s “key asset was its founder’s ability to raise money”.
The exit of Mr Milton will also sharpen the focus on chief executive Mark Russell.
Several Nikola investors previously told the Financial Times they were impressed by Mr Russell, who they saw as a calming counterbalance to Mr Milton.
In a note published on Sunday before the announcement of Mr Milton’s departure, Jeffrey Osborne, analyst at Cowen, the financial services group, said it “will take some time for the team to regain credibility with investors”.
He described Mr Milton as “self-confident, boastful and always in ‘sales mode’”, but said the founder was guilty of setting “overly aggressive” targets, rather than “intentional deception”.
In the days that followed the Hindenburg report, several of the allegations were independently verified by the FT, including that Nikola rolled a truck down a hill for a promotional video.
In a detailed defence set out a week ago, the company also confirmed some aspects of the report, including its use of supplier parts.
On Friday the FT reported that Nikola was using Romeo Power, a Californian battery group, to supply the batteries for its prototype trucks.
Following the short-seller’s accusations, the US Department of Justice made inquiries into the claims, which Nikola has described as “false and misleading”.