The founder and former chairman and CEO of electric heavy truck maker Nikola (NASDAQ:NKLA), Trevor Milton, was found guilty of three of four counts of fraud relating to misleading statements that he made to boost Nikola’s stock price and thus his holdings. On Friday, a federal jury in New York convicted Milton of one count of securities fraud and two counts of wire fraud.
The court acquitted Milton of a second count of securities fraud. Milton will be sentenced on January 27, 2023. As per the Wall Street Journal (WSJ), Milton might face a shorter prison term than the maximum penalty of 20 years for each count, due to the federal sentencing rules.
Investors Misled by Milton from the Beginning
Milton founded Nikola in 2015 and took it public, via a special purpose acquisition company (SPAC), in June 2020. He repeatedly lied about the development of the company’s trucks and technology to bid up the price of Nikola stock. For a brief period, Nikola’s market value crossed that of auto giant Ford (F) even without the company generating any revenue.
Milton resigned as executive chairman and a member of the board in September 2020 amid fraud allegations made by short-seller Hindenburg Research.
Meanwhile, last year, Nikola reached a $125 million settlement with the Securities and Exchange Commission (SEC) with regard to charges that it misled investors about its products, technology, and commercial prospects. The company neither admitted nor denied the SEC’s findings.
While Milton still owns Nikola’s shares, the company has no business ties with him.
Is Nikola a Buy, Hold, or Sell?
Wall Street currently has a Moderate Buy consensus rating on Nikola stock. The average NKLA stock price target of $9.50 implies 210.5% upside potential from current levels. Shares have plunged 69% so far this year.