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The Tesla rival brought down by hubris and lies
Electric vehicle company’s demise is unique in that it was caused by fraud
Howard Mustoe20 December 2023 • 6:00am
With tears in his eyes, Trevor Milton made his final plea to a judge in a court in Manhattan this week to try and avoid a prison term that, under federal guidelines, could be 27 years or longer.
He had had no intention to harm anyone and he “did not commit those crimes” he said.
It came to little. Milton was this week sentenced to four years in prison and handed a $1m fine for defrauding investors in Nikola, the electric truck business he founded.
The tears and pleading were a far cry from the slick salesmanship on show from Milton when he unveiled Nikola’s six-wheel truck, designed to haul juggernauts across the US under
electric or hydrogen power.
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In 2016, in the style of a Steve Jobs presentation, he paced about a stage in front of a shiny white prototype as he claimed his company had $4bn in pre-orders. Plans for a fleet of hydrogen refuelling stations across North America were touted.
Truck owners would receive, for free, a million miles of hydrogen fuel from stations that would be built from 2019, Milton promised.
He said: “It’s a little expensive, ok, you could probably buy a jet with what it cost to build this thing, so we are going to try and keep people from driving off, but this thing fully functions and works, which is really incredible.
“What we show you we can actually deliver on, and that’s the neatest part about Nikola.”
A Nikola Refuse truck, pictured in 2020 around the time of Milton's resignation from the role of executive chairman CREDIT: AFP
That proved not to be the case. Judge Edgar Ramos told Milton this week: “The law does not grant a pass for good intentions.
“Over the course of many months, you used your considerable social media skills to tout your company in ways that were materially false.”
Nikola, which was founded in Utah in 2014, was one of a wave of electric car companies founded over the last decade to compete with Tesla as investors bet big on the death of fossil fuels. Nikola’s
competition with Elon Musk’s business was overt – it was also named after Nikola Tesla, the electricity pioneer.
While Tesla aimed to reinvent passenger travel, Milton said Nikola would clean up the haulage business in the US. Its hydrogen-powered trucks would transport vital goods across the vast Americas without emissions.
However, the 41-year-old’s promises came unstuck in 2020 shortly after
joining the stock market in New York.
Short-seller Hindenburg Research got wind of the fact that Nikola’s truck didn’t actually work and was not close to working. In a now infamous episode, Hindenburg revealed that a video posted by Nikola showing the truck in motion was actually footage of it rolling down a hill.
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Hindenburg Research called the company “an intricate fraud built on dozens of lies.”
The company admitted shortly after Hindenburg’s report that the truck did not indeed work, although it also played down the importance of Hindenberg’s claims.
Nikola was initially valued at $3.3bn when it joined the stock market and enjoyed a rally that saw it briefly worth more than Ford, topping $30bn.
However, shares tumbled after Hindenburg’s claims and are down 90pc since their peak.
Shares in Nikola are down 90pc since their peak
In 2021, Nikola paid a $125m settlement to the U.S. Securities and Exchange Commission (SEC) in a civil case against it in which it admitted no wrongdoing. Milton resigned over the matter and was indicted on criminal fraud charges that same year.
Falling short of an apology, Milton said this week: “I obviously feel awful for all the resources and time this has caused everybody. I don’t think you can feel human without feeling terrible for everyone involved.”
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He asked the judge to consider his “unusually tender heart” and the fact he was not a “very seasoned CEO”.
Milton’s defence lawyer Marc Mukasey argued that the lawsuits had left his client “financially crippled”. He faces private lawsuits and an SEC case which is ongoing.
The judge did show some leniency, failing to hand down the 11-year sentence prosecutors were pushing for. However, Milton, who intends to appeal his conviction, was in tears when the judgement was handed down.
US Attorney Damian Williams said: “Today’s sentence should be a warning to start-up founders and corporate executives everywhere — ‘fake it till you make it’ is not an excuse for fraud, and if you mislead your investors, you will pay a stiff price.”
While Milton’s downfall has been severe, Nikola remains a going concern. It is now worth about $900m, a fraction of its former value.
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It is one of a number of Tesla
competitors to have been through a boom and bust cycle – though unique in being caused by fraud.
Electric truck-making rival Lordstown Motors filed for bankruptcy protection in the summer.
The UK’s Arrival, a van maker once valued at $13bn, said in October it is cutting one in four jobs.
British inventor James Dyson also scrapped plans to develop his own electric car in 2019 after realising it would take too long to break even.
Once, it was thought that electric vehicle startups had the edge over their elderly, combustion engine-focused rivals. After all, big incumbents like Ford, Volswagen and Toyota had production lines, designs and stock that would soon be worthless as countries moved to ban petrol and diesel.
But these same companies had strong balance sheets and
started to launch electric cars and trucks of their own.
Meanwhile, the newcomers started to feel the pinch from higher borrowing costs.
Potential customers also started to feel poorer from inflation and higher borrowing costs too. Many EV companies marketed themselves in the luxury space, making for a crowded market with fewer buyers.
Professor David Bailey, a car industry expert at Birmingham University, said: “In any new wave of technology there is going to be a whole load of startups and a lot of them will fail.
“I think increasingly, investors are differentiating. Initially, anything that was moving in the industry was getting quite a lot of investment support. Now, they’re much more acutely aware of the fact that it’s pretty tough for a lot of them to survive.”
Last year Nikola launched a battery-powered truck that did in fact work. But the company’s difficulties continue. In August, it recalled all 209 that had been delivered and halted sales over fire risk fears.
(chiedo perche sono anche nikolino
)
se fallisce cercheran un altro fornitore no? adesso chiedo info a chi di dovere 