Nikola Settles $125M SEC Claim; Shares Up

Nikola Corporation (NKLA) has resolved all claims with the Securities and Exchange Commission (SEC) by agreeing to pay $125 million. The fine will be paid in five installments over two years. Following the news, shares dropped 1.3% briefly, but closed the day up 1.8% at $9.42 on December 21.

Nikola is a zero-emission transportation and energy infrastructure company. NKLA became a publicly traded company on June 4, 2020, through a merger with a special purpose acquisition corporation (SPAC) entity. The company’s shares have lost 44% year-to-date.

Defrauding Investors

Earlier this year, the SEC arrested Nikola’s founder, Ex-CEO, and Executive Chairman Trevor Milton, over a defrauding case. The SEC said that in 2020, Trevor misled investors by making false statements regarding truck production and technological milestones, even though the company had not commenced any actual production.  

The company was also accused of misleading investors by omitting or misrepresenting material facts about its technological developments, especially related to its hydrogen station, as well as the risks and rewards related to its contemplated partnership with a leading auto manufacturer.

However, the company has not admitted nor denied any wrongdoing related to the case.

SEC Settlement

Nikola has finally settled all claims with the SEC by agreeing to pay $125 million, and seeks to focus on the development and expansion of its business. In its third-quarter earnings report, Nikola disclosed that it had created a $125 million reserve to account for the unexpected settlement.

Nikola will pay the first settlement by the end of 2021, and the rest will be paid semi-annually through 2023. Nikola has also taken action to seek reimbursement from the founder for the SEC charges.  

Management Comments

The company said, “We are pleased to bring this chapter to a close as the company has now resolved all government investigations. We will continue to execute our strategy and vision to deliver on our business plan, including delivering trucks to customers, expanding our manufacturing facilities and our sales and service network, and building out our hydrogen infrastructure ecosystem including hydrogen production, distribution, and dispensing stations.”

Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, said, “As the order finds, Nikola Corporation is responsible both for Milton’s allegedly misleading statements and for other alleged deceptions, all of which falsely portrayed the true state of the company’s business and technology… This misconduct — and the harm it inflicted on retail investors — merits the strong remedies today’s settlement provides.”

Consensus View

The NKLA stock has a Hold consensus rating based on 4 unanimous Holds. The average Nikola price target of $13.67 implies 45.1% upside potential to current levels.

Insider Trading

TipRanks’ Insider Trading Activity shows that Insider Signal is currently Negative on Nikola, with corporate insiders selling $164.4 million shares in the last quarter.

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