Nikola’s Milton charged with misleading investors

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Nikola Corp. founder Trevor Milton is in federal custody Thursday, charged with misleading investors about the state of the company, which he left in September.

“Trevor Milton is innocent,” his lawyers said in a statement. “This is a new low in the government’s efforts to criminalize lawful business conduct. Every executive in America should be horrified.”

Here are some excerpts from the U.S. Securities and Exchange Commission’s 66-page complaint against him, as well as the criminal indictment:

Share Price

Milton was “intensely focused” on the company’s stock price, calling and texting senior executives to “do something” on days when the shares were falling, the SEC complaint says. He also “tracked the daily number of new Robinhood users who held Nikola stock.”

Fountain Surprise

Milton used his social media presence and appearances in interviews to announce new initiatives and changes, before informing the company, the SEC said.

“On June 25, 2020, Milton sent a series of tweets from his personal account in which he claimed that Nikola would offer a drinking fountain in the Badger. This information came as a complete surprise to Nikola’s designers, engineers, and marketing personnel. When informed of the tweets, one engineer questioned whether ‘this [is] a joke,’ a marketing employee wrote that his ‘head is fuzzy,’ and a designer texted, ‘[u]hhhhh what.’”

Social Media

Nikola executives repeatedly tried to rein in Milton’s social media, the SEC said. At one point the president asked Milton to let the company’s chief legal officer pre-screen his tweets — an effort akin to what Tesla Corp. did with Elon Musk after the SEC sued him over his tweets.

“Senior Nikola executives attempted other tactics in the spring and summer of 2020 to try to rein in Milton’s social media presence, to no avail.”

They scheduled media training for executives at the company, but Milton did not attend. Instead, Milton’s response was to assert “that these senior executives did not understand current capital market dynamics or what he was trying to accomplish with retail investors, and that he needed to be on social media to put out good news about Nikola to support its stock price.”

‘No Exceptions’

At a press conference Thursday, Gurbir Grewal, the SEC’s head of enforcement, highlighted the obligations of corporate officers to provide complete and accurate information about their companies.

“There is no end-around or exceptions to this obligation,” Grewal said. “Corporate officers cannot say whatever they want on social media in violation of federal securities laws.”

“Milton was personally involved in soliciting reservations from several potential customers,” the SEC said. “He communicated to potential customers that the reservations were cancelable for any reason at any time. For example, on May 9, 2016, as part of his efforts to secure the largest reservation Nikola had received to-date, Milton wrote to a potential customer, ‘[y]ou have full ability to cancel at any time before the options, color and major deposit is made . . . .’