A casually dressed man gives a presentation in front of a semitruck.
Enlarge / Nikola Chairman Trevor Milton unveils the Nikola One truck in December 2016.

Trevor Milton, founder of electrical truck startup Nikola, resigned his job as govt chairman of the corporate on Sunday—efficient instantly. Nikola’s inventory plunged after the information and is presently buying and selling at round $28 per share, which is down 18 %.

Milton’s resignation got here simply 10 days after a bombshell analysis report revealed that Milton wasn’t telling the truth in 2016 when he unveiled the corporate’s first product, the Nikola One, and claimed that it “absolutely features.” The report from short-selling firm Hindenburg Research additionally revealed {that a} Nikola One truck that seemed to be driving down a freeway beneath its personal energy in a 2018 promotional video was really rolling down a hill. Nikola acknowledged last week that it by no means acquired the Nikola One working.

The Hindenburg revelations put Nikola’s administration beneath immense strain. Each the Securities and Change Fee and the Division of Justice have reportedly opened investigations into doable fraud by the corporate. Over the weekend, Milton supplied (voluntarily, he says) to resign as govt chairman, and Nikola’s board accepted his supply. Milton may also relinquish his seat on Nikola’s board.

Nikola has chosen former GM govt Stephen Girsky as its new chairman. Mark Russell will keep on as CEO. Till now, Russell has had a decrease profile than a typical CEO, with Milton appearing because the face of the corporate. It is unclear whether or not Russell or Girsky will take over Milton’s position as Nikola’s de facto chief.

An SEC filing says that Milton is relinquishing his declare to 4.9 million unvested shares in Nikola price round $130 million. Nevertheless, he’ll get accelerated vesting for an additional 600,000 shares price round $16 million. Milton owns greater than 90 million Nikola shares price $2.5 billion at present costs, so these are small figures in comparison with his present stake within the firm.

Milton’s exit contract stipulates that he’ll hand over declare to a $20 million consulting contract and can as a substitute advise Nikola free of charge via the tip of the yr. Nikola may also pay $100,000 for a private safety element for Milton over the subsequent three months.

Nikola’s struggles aren’t over

Nikola’s defenders argue that the deceptions revealed by Hindenburg are previous information as a result of Nikola way back deserted plans to commercialize the Nikola One. Lately, Nikola has centered its energies on new merchandise: the Nikola Two and Nikola Tre semi vehicles and the Nikola Badger pickup.

Nikola does have a functioning prototype of at the least the Nikola Two. Furthermore, the corporate now has partnerships with established truck makers like BoschIveco, and GM to design and construct its newer vehicles. So we needn’t fear that Nikola’s new vehicles are actually vaporware just like the Nikola One turned out to be.

The important thing query, nonetheless, is whether or not Nikola may have any specific benefit over established truck makers—both within the vehicles’ capabilities or within the means to carry them to market profitably. With the Nikola Badger, for instance, Nikola is just not solely outsourcing manufacturing of the truck, it is also outsourcing a lot of the truck’s design and its powertrain.

It is not clear what Nikola is bringing to the desk apart from a sack of money and a model title. And merely promoting rebadged variations of different firms’ vehicles would not look like a recipe for long-term profitability.

Might hydrogen save Nikola?

Nikola boosters level to the corporate’s distinctive hydrogen-based enterprise mannequin as the important thing to Nikola’s success. As an alternative of promoting hydrogen-powered semi vehicles to clients outright, Nikola is planning to lease vehicles to clients bundled with hydrogen gasoline and a upkeep contract.

This looks like a probably intelligent enterprise mannequin. From the client’s perspective, leasing a truck and getting a preset worth for hydrogen reduces the dangers of switching to hydrogen expertise—particularly from an unproven startup.

From Nikola’s perspective, the leasing mannequin offers a assured buyer base for the community of hydrogen fueling stations it plans to construct alongside main highways. Additionally, this sort of bundled service may finally permit Nikola to earn greater earnings on every truck it sells.

However right here, too, the massive query is whether or not Nikola really has any distinctive capabilities to drag off its bold imaginative and prescient. The deliberate community of hydrogen gasoline stations would not exist but, and it is not clear that Nikola has the capability to construct it. Milton has claimed that Nikola has pushed the price of producing hydrogen down from $16 to $4 per kilogram (in some interviews, he has talked about even decrease figures). However he hasn’t supplied a lot proof to again up these claims.

After all, you can make an identical critique of any startup touting a brand new, unproven expertise or enterprise mannequin. However that is the place the credibility of a startup’s founders is crucial. A historical past of previous deception makes it more durable for buyers to imagine an organization’s new guarantees.

However thus far, Nikola appears to be retaining a core of true believers in its imaginative and prescient. Nikola’s present inventory worth of round $28 is down considerably from the excessive of $50 achieved when Nikola announced its deal with GM earlier this month. However the inventory worth nonetheless values Nikola round $10 billion—an astonishing determine for an organization that has but to ship a single truck to clients.

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