Market News

Founder of Nikola (NASDAQ:NKLA) in Legal Trouble for Allegedly Deceiving Stakeholders

Story Highlights

Accused of engaging in activities to benefit himself by lying about NKLA’s technology and commercial prospects, the company’s Founder, Trevor Milton, faces a securities-fraud trial.

The Founder and ex-CEO of Nikola (NASDAQ:NKLA), Trevor R. Milton, is set to face a securities-fraud trial starting this week. Milton is accused of defrauding investors by lying about the prospects of its battery-electric vehicles, according to a Wall Street Journal report. 

It all began in 2020 when a short report from Hindenburg Research in September accused Nikola and Milton of deception and misleading partners and investors. Thereafter, Nikola termed the short report false, and Milton voluntarily stepped down from the role of Executive Chairman. 

Milton’s problems didn’t end with his resignation. Last year, the SEC (Securities and Exchange Commission) accused Milton of engaging in a fraudulent scheme for his benefit by deceiving investors about the company’s product technology and commercial prospects. 

Amid legal troubles, Nikola’s recent regulatory filings reveal that Milton bought NKLA stock at $5.8/share on August 24 for a total consideration of $17.4 million.

However, could all these developments hurt NKLA stock? Let’s see what analysts are saying.

What Is the Prediction of Nikola Stock?

Analysts on TipRanks have a Neutral stance on NKLA stock, which has a Hold consensus rating based on one Buy and four Holds. However, due to the steep decline in its price (about 45% year-to-date), Nikola’s average price forecast of $9.10 implies 67.9% upside potential to current levels. 

Contrary to analysts, hedge funds and retail investors seem to be positively inclined toward the stock. While hedge funds bought 12,400 NKLA stock last quarter, 4.2% of investors increased their exposure to the stock in the same period. 

Overall, Nikola has a Smart Score of 7 out of 10 on TipRanks, implying that NKLA stock could perform in line with market averages. 

Bottom Line

NKLA is progressing well on the production and delivery front and securing partnerships. However, investors should take caution as the legal troubles faced by its Founder and ex-CEO could adversely impact its prospects.

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