After becoming embroiled in scandal, formerly hot startup and Wall Street star had said it would likely run out of cash
Troubled electric vehicle maker Nikola has filed for Chapter 11 bankruptcy protection months after saying that it would likely run out of cash early this year.
Nikola was a hot startup and rising star on Wall Street before becoming enmeshed in scandal and its founder was convicted in 2022 for misleading investors about the Arizona company’s technology.
At the trial of founder Trevor Milton, prosecutors say a company video of a prototype truck appearing to be driven down a desert highway was actually a video of a nonfunctioning Nikola that had been rolled down a hill.
But the hype around the company was immense. In 2020, Nikola was valued at around $30bn, exceeding the market capitalization of Ford Motor Company.
The company has had difficulty scaling its business, which mostly focuses on EV trucks. In the third quarter, Nikola produced 83 trucks but recorded a net loss of almost $200m. It produced 77 trucks in the second quarter, with a net loss of nearly $134m.
Nikola filed for protection in the United States bankruptcy court for the district of Delaware and said on Wednesday that it has also filed a motion seeking approval to pursue an auction and sale of the business.
The company has about $47m in cash on hand.
Nikola Corp plans to continue limited service and support operations for vehicles on the road, including fueling operations through the end of March, subject to court approval. The company said that it will need to raise more funding to support those types of activities after that time.
“Like other companies in the electric vehicle industry, we have faced various market and macroeconomic factors that have impacted our ability to operate,” CEO Steve Girsky said in a statement.
The executive said the company has made efforts in recent months to raise funds reduce liabilities and preserve cash, but that it hasn’t been enough.
“The Board has determined that Chapter 11 represents the best possible path forward under the circumstances,” Girsky said.
In December 2023 Milton was sentenced to four years in prison after being convicted of exaggerating claims about his company’s production of zero-emission 18-wheel trucks, leading to sizeable losses for investors.
Milton was convicted of fraud charges, and portrayed by prosecutors as a con man six years after he had founded the company in a basement in Utah.
Prosecutors said Milton falsely claimed to have built its own revolutionary truck that was actually a General Motors product with Nikola’s logo stamped onto it.
Called as a government witness, Nikola’s CEO testified that Milton “was prone to exaggeration” when pitching his venture to investors.
Milton resigned in 2020 amid reports of fraud that sent Nikola’s stock prices into a tailspin. Investors suffered heavy losses as reports questioned Milton’s claims that the company had already produced zero-emission 18-wheel trucks.
The company paid $125m in 2021 to settle a civil case against it by the SEC. Nikola didn’t admit any wrongdoing.
Aside from its personal troubles, Nikola has also had to contend with a more perilous environment for EV makers as sales slow. Donald Trump has promised to eliminate what he incorrectly calls Joe Biden’s “electric vehicle mandate”.
What that means in practice is that his executive order will revoke a non-binding goal set by the former president to have EVs make up half of new cars sold by 2030. He will also likely seek repeal of a $7,500 tax credit for new EV purchases approved by Congress as part of Biden’s landmark 2022 climate law, the Inflation Reduction Act.
Shares of Nikola, based in Phoenix, Arizona, fell below $2 late last year and tumbled another 40% on Wednesday.
Source: The Guardian
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