GM Says "Will Work To Close" Nikola Deal After Founder Trevor Milton Resigns, Stock Plunges 25%

Update 9/21/20 0835AM EST: General Motors has released a statement saying it has acknowledged the departure of Nikola founder Trevor Milton and that the company will work with Nikola to close its previously announced transaction.

"Nikola, Honda and others represent just one part of our overall EV strategy," General Motors stated

*GM SAYS WILL WORK WITH NIKOLA TO CLOSE TRANSACTION ANNOUNCED EARLIER

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Nikola stock plunged more than 25% after founder Trevor Milton unexpectedly resigned as Executive Chairman of Nikola just days after the company was reported to be the focus of investigations by the SEC and DOJ following a highly critical short-seller report. The resignation was first reported by FreightWaves.

“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,” Milton wrote at 2:21am in a terse, disjointed tweet to which he blocked responses (one can imagine why), confirming the FreightWaves rerport. "So I made the difficult decision to approach the board and step aside."

Well, Trevor, it was never about you as the NKLA price confirms, but we are confident the regulators will be happy to make it about you now that you have confirmed that the Hindenburg report was accurate and most, if not all, of Nikola is a fraud. Until then, just keep an eye on Trevor taking a private jet to various non-extradition countries.

Milton's tweet was merely the latest indication that Milton, like Tesla's Elon Musk, has relied on social media to promote his company. In February, he introduced the Badger truck via a tweet, calling it “the most advanced electric & hydrogen pickup, designed to take down the Ford Raptor.” On June 8 he tweeted that Nikola would start taking Badger reservations later in the month for “the most bad a - zero emission truck.” Potential buyers paid deposits as high as $5,000 - without even seeing a prototype of a vehicle that won’t go on sale until 2022.

As Bloomberg notes, "investors have sometimes struggled to keep up with Milton’s messages, especially given the evolving list of projects Nikola is pursuing: battery-electric big rigs in Europe, fuel-cell-powered semis in the U.S., an electric pickup to be built by GM, becoming the preeminent supplier of hydrogen for fleets of vehicles and vague proposals to enter the market for high-performance sports cars."

“It’s a bit confusing trying to follow Trevor on his various social-media outlets about the timing and cadence of communication of the different variables that you’re talking about,” Jeff Osborne, a Cowen & Co. analyst, told executives during Nikola’s first earnings call on Aug. 4.

The company announced that Stephen Girsky, who is former Vice Chairman of General Motors Co. and a member of Nikola’s board, will fill Milton's role as chairman of the board, effective immediately.

As part of his resignation, Milton "agreed to relinquish 100% of the 4.86m performance-based stock units granted to him on Aug. 21," according to the company's 8-K. He also "gave up right or claim to enter into a two-year consulting agreement with an annual fee of $10 million."

Milton's resignation comes less than 2 weeks after Hindenburg Research's original report calling the company an "intricate fraud" and just 6 days after Hindenburg's follow up report stating it viewed Nikola's response as a "tacit admission of securities fraud". 

It remains to be seen whether the sudden departure has anything to do with reports of both the Securities and Exchange Commission and the Department of Justice making inquiries to the company. Additionally, Tweets began to surface late Sunday night by the CEO of Entrata, David Bateman, who alleged that women had "come forward accusing Milton of groping her".

The sudden resignation also came just hours after Cowen put out a note defending the company and Milton, placing a $79 price target on the company. "To be clear, we don't believe Nikola is a fraud," Cowen said.

Oops.

As reported previously, Nikola had said it voluntarily reached out to the SEC to discuss its issues with the Hindenburg report, and ultimately held a call with agency officials on the morning of Sept. 11. Nikola says Hindenburg was attempting to profit from a "manufactured decline" in its share price.

"Nikola has contacted and briefed the U.S. Securities and Exchange Commission regarding Nikola’s concerns pertaining to the Hindenburg report," the company said early last week. “Nikola intends to fully cooperate with the SEC regarding its inquiry into these matters."

In a lengthy report on Sept. 10 Hindenburg Research compared Nikola to Theranos, calling it an "intricate fraud" which overstated the capabilities of its earliest test trucks among many other allegations. Among the bolder accusations made by Hindenburg Research in their recent scathing report about Nikola Corporation was the allegation that Nikola faked its Nikola One semi truck "in motion" video, which appeared to show a functioning big rig barreling through the desert, trailer in tow.

Some people even took to the desert with their own cars to recreate the experiment on the same hill. 

On the morning of September 14, Nikola put out a response that confirmed its Nikola One wasn't powering itself during the company's 2018 commercial featuring the semi. You can read Nikola's full response here

Nikola’s shares have roller-coastered since the company went public on June 4 in a reverse merger, with Girsky’s blank-check company VectoIQ. At one point, they soared so high driven by clueless Robinhood momentum-chasers that the startup’s market value exceeded Ford Motor. After the third day of trading, Milton - who owns 35% of the company, based on regulatory filings - was worth $9 billion, making him the world’s 188th richest person. His net worth was valued at $4 billion before Monday’s stock plunge.

The question now is whether GM CEO Mary Barra, who infamously defended her investment in Nikola claiming sufficient due diligence was performed, follows in Milton's footsteps and resigns next.