Opinion | When Electric Vehicles Sound Too Good to Be True

Opinion | When Electric Vehicles Sound Too Good to Be True

Last week kicked off the fraud trial of

Trevor Milton,

founder and former CEO of electric-vehicle startup


The government alleges that he deceived retail investors about Nikola’s technology. He has pleaded not guilty, but the evidence from the government’s 49-page indictment will be hard to refute.

To take one example from the indictment, Mr. Milton in 2017 ordered an inoperable prototype of a hydrogen-fueled semi truck to be towed to the top of a hill to tape a promotional video. The brakes were then released, and the truck rolled down the hill. The truck’s door was taped during the shoot to keep it from falling off, and the batteries were removed to prevent it from catching fire.

Yet in January 2018 Nikola posted a video on


of the truck appearing to power effortlessly down a flat road, with the caption: “The Nikola Hydrogen Electric trucks will take on any semi-truck and outperform them in every category; weight, acceleration, stopping, safety and features—all with 500-1,000 mile range!”

The government will have to prove not only that Mr. Milton lied but that investors relied on his deceptions. Complicating the case, sophisticated investors helped take the company public and promoted it. Based on the evidence in the indictment, they may have been aware Mr. Milton was blowing hot air.

But it’s also possible that they simply failed to look under Nikola’s hood. Either way, retail investors ended up taking the brunt of the alleged fraud’s financial impact. Herein is a lesson about getting into vehicles with so-called socially responsible investors.

Nikola didn’t float public shares the usual way, which requires companies to file registration statements and prospectuses with the Securities and Exchange Commission. Corporate execs are then required to abide by a “quiet period” during which executives can’t promote the company until 40 days after its stock starts trading. These rules are intended to provide a level playing field for investors.

Instead, Nikola merged with the special-purpose acquisition company VectoIQ Acquisition Corp., launched by Cowen Investments,


and former

General Motors

executives. These inside investors received millions of shares in VectoIQ and also floated some to the public at $10 apiece to raise money to acquire another company.

Nikola announced plans to combine with VectoIQ in March 2020, thereby going public. “Nikola’s vision of a zero-emission future and ability to execute were key drivers in our decision,” said Stephen Girsky, managing partner of VectoIQ and a former GM executive.


boasted that “Nikola, with its vision of a zero-emission future in heavy-duty transportation, is an example of an enterprise that is creating value for all its stakeholders, including society at large.” It’s hard to know whether they believed their own puffery.

At the time Nikola was struggling to execute its business plan, which Mr. Milton obscured with far-fetched claims. “Up until Nikola came in the market, hydrogen was around $16 a kilogram, U.S. dollars. Now Nikola is producing it well below $4 a kilogram,” Mr. Milton said in a podcast. In fact, according to the indictment, Nikola had never produced hydrogen and was buying the fuel at $16 a kilogram.

The indictment alleges Mr. Milton lied to investors in order to increase the value of his stock holdings. Perhaps. But other investors also stood to benefit from his deceptions. According to the indictment, “certain institutional investors who received Nikola shares as part of the SPAC transaction or the PIPE and had access to more complete information regarding Nikola’s products and technology were able to sell their stock for a significant profit.”

These investors included VectoIQ’s partners, BlackRock and Cowen, Fidelity Management & Research Co. and ValueAct Spring Fund, a socially responsible investment fund. After the completion of its SPAC merger in June, Nikola’s stock catapulted to $65.90 a share with its market valuation surpassing


and Fiat Chrysler’s.

GM announced on Sept. 8, 2020, that it was taking an 11% stake in Nikola, which CEO

Mary Barra

heralded as an “industry leading disrupter.” Two days later, short-selling firm Hindenburg Research published a report exposing Mr. Milton’s deceptions. Nikola’s stock price plunged, and a couple of weeks later Mr. Milton stepped aside from the company. Its stock is now trading at about $5 a share.

The story of Mr. Milton’s alleged fraud in some ways mirrors that of

Elizabeth Holmes,

who founded the Silicon Valley blood-testing startup Theranos. When her technology failed to live up to her hype, she concealed its shortcomings. Yet whereas the victims of Ms. Holmes’s fraud were sophisticated, deep-pocketed investors, those in Nikola’s case were retail investors taken for a ride by Mr. Milton and his deep-pocketed backers.

One final observation: Mr. Milton’s alleged deceptions are no different in kind from those of progressive politicians who have sold the country on a fossil-fuel-free future based on technologies that don’t exist. Alas, it isn’t a crime to lie to the American people, no matter how much it costs them.

Journal Editorial Report: How many other states will sign on to an electric-only future? Images: AFP via Getty Images Composite: Mark Kelly

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