Board of Once-High-Flying EV Maker Nikola Being Sued as Shares Drop to 91 Cents

A shareholder in Nikola Corp. is suing certain current and former directors and officers of the maker of zero emission, hydrogen-powered trucks, alleging that they participated in a scheme to mislead stockholders or failed to prevent securities fraud by former CEO Trevor Milton.

A federal jury last October convicted Milton, who founded Nikola in 2015, of securities fraud with regard to serial lies about the company’s trucks and technology.

Milton’s motion for a new trial was denied last month, and he is scheduled to be sentenced on November 28, 2023.

The suit, by Ed Lomont, a current Nikola shareholder, was filed last week in Delaware Chancery Court.

“Nikola’s internal control structures were in shambles during the relevant period,” the suit alleges. “These internal controls were the responsibility of Nikola’s then-serving officers and directors”. 

In addition to current and former members of Nikola management, including Milton, the suit alleges various current and former board members of neglecting their fiduciary responsibilities to the company.

Nikola was notable in the prominence of many of the directors it recruited to its board, including activist investor Jeffrey Ubben, a founder of Value Act Capital; Mike Mansuetti, president of Robert Bausch LLC, the North American arm of the German engineering giant Bausch Group; and Gerrit Marx, CEO of vehicle maker Iveco Group N.V.

All three were among those named as defendants in the suit. Ubben and Marx have both stepped down from the board while Mansuetti remains.

A spokesman for Nikola in an email said: "We cannot comment on ongoing legal actions and we will respond officially in court and appropriate filings."

Ubben did not return an email and phone message from The Messenger to his current hedge fund, Inclusive Capital Partners. Marx  did not immediately respond to an email sent to Iveco.  A spokesman for Bosch referred calls regarding Mansuetti’s position at Nikola to that company.

A lawyer for Milton did not immediately return a phone call.

Nikola went public via merger VectoIQ Acquisition Corp., a special purpose acquisition company (SPAC) in June, 2020.

SPAC’s are blank-check investment pools designed to acquire operating companies to take them public. It’s a quicker and easier way to tap public markets compared with the traditional process of initial public offerings and also invites less scrutiny.

In September 2020, short-seller Hindenburg Research published a report alleging that numerous claims by Milton concerning its battery and hydrogen technology, as well as truck performance and other information were wildly untrue.

Most notably, a video Nikola produced showing one of its trucks speeding along a road was elaborately staged, and the vehicle in fact was not operational and was simply rolled down a hill, the short-seller report said.

Nikola shares have since collapsed, from a high of $93.99 in June 2020 to 91 cents at Monday’s close.