Phoenix-based electric-truck manufacturer Nikola is paying $125 million to settle fraud charges by the U.S. Securities and Exchange Commission.
The move is viewed as part of a crackdown on special purpose acquisition companies, better known as SPACs, which have emerged in recent years as a popular way to bring unproven startups to the public markets.
The SEC alleges that Trevor Milton, the company’s founder and former CEO and executive chairman, purposely misled investors by inflating some company details and leaving other bits out in order to jack up—and keep up—Nikola’s stock price.
“The order finds that Milton misled investors about Nikola’s technological advancements, in-house production capabilities, hydrogen production, truck reservations and orders, and financial outlook,” the SEC said in a statement. “The order also finds that Nikola further misled investors by misrepresenting or omitting material facts about the refueling 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.”
In the settlement, Nikola neither admits guilt nor denies it.
Nikola went public in June 2020 by merging with a SPAC, also called a blank-check company. After the deal with VectoIQ Acquisition Corp., Nikola listed on the Nasdaq with the ticker symbol NKLA.
The truck maker also released a statement, which says in part:
“We are pleased to bring this chapter to a close as the company has now resolved all government investigations. We will continue to execute on our strategy and vision to deliver on our business plan, including delivering trucks to customers, expanding our manufacturing facilities and our sales and service network, and building out our hydrogen infrastructure ecosystem including hydrogen production, distribution and dispensing stations.”
The company says it’s seeking reimbursement from Milton for costs and damages connected to this probe.
He stepped down in September 2020
The money will be paid to the federal government in five installments over two years with the first installment by the end of this year, according to Nikola.
Nikola’s stock was $9.36 per share, up 11 cents or 1.19, in early-morning trading.