Nikola founder Trevor Milton’s federal fraud trial will now begin Sept. 12 after his attorneys persuaded a federal judge to delay the case following the addition of a new charge last week.
Federal prosecutors argued for a one-week delay from the trial scheduled to begin July 18. Milton’s attorney asked for 30 days. Empaneling a jury in August is difficult due to back-to-school demands for potential jurors and scheduled vacations, U.S. District Court Judge Edgardo Ramos said.
That led Milton’s team to ask for a delay until September, which Ramos granted Wednesday after agreeing a delay was reasonable given that Milton had requested a speedy trial.
The former executive chairman of the startup electric truck maker faces two counts each of securities fraud and wire fraud. The latest charge, involving a land contract for property in Utah that Milton offered Nikola (NASDAQ: NKLA) stock options in partial payment, carries up to a 20-year prison sentence.
New charge leads to Nikola founder’s trial delay
That charge, filed last week in a superseding indictment, led to the request for a delay.
Milton’s attorneys wrote to Ramos that they were blindsided by the charge. A landowner filed a civil suit in March claiming Milton suggested Nikola stock options could grow in value. The company’s stock price was tanking at the time.
The original three charges accuse Milton of using social media and interviews with business media to pump Nikola’s stock price with false claims about the company’s technical prowess and progress.
The allegations originally arose in a 67-page report by short seller Hindenburg Research in September 2020. A Nikola investigation conducted by an outside law firm verified some of the claims.
Nikola share authorization voting ends Thursday
Separately, voting concludes Thursday on a Nikola shareholder proposal to increase the number of authorized shares in the company by 33% to 800 million. The goal is to increase financial flexibility for Nikola to scale its truck manufacturing and hydrogen business.
Milton, who owns about 11% of Nikola’s outstanding shares and has voting rights to another large block of shares co-owned with CEO Mark Russell, voted against the proposal. The shortfall in votes led to the company’s June 1 annual meeting being adjourned until Thursday. The share authorization increase requires a favorable vote of 50% plus one vote of all outstanding shares.
In addition to practically daily communications by a proxy solicitation firm to line up favorable votes, Nikola Chairman Steve Girsky and Russell both have pleaded with investors to vote their proxies in favor of the proposal.
‘Extremely unusual outreach’
“It is extremely unusual to see this kind of outreach to retail investors,” said Jay Kesten, a Florida State law professor who specializes in corporate governance.
In a video message Tuesday, Russell told shareholders that without the share authorization, Nikola “will be constrained in our growth a little bit. We need to raise more money to keep the growth going, to hit our business objectives and to avoid losing important business opportunities, including some that might go to our competitors.“
The business needs include building out a hydrogen supply network for fuel cell-powered trucks coming in 2023 and completing a new $600 million manufacturing plant in Coolidge, Arizona.
As of June 8, the combination of fully diluted shares, including shares outstanding and options, restricted stock units and warrants, and reserved/unissued shares from Nikola’s equity line of credit and convertible notes equates to 567 million shares. Nikola has approximately 33 million shares available for other purposes.
“While we believe we have sufficient liquidity for the next 12 months… we’d like to keep that at 12 months at any given point,” Russell said. “So, increasing the number of authorized shares will give us the flexibility that we need to support among other things, the continued growth of the business.”
Nikola might need to wait a year to bring up the proposal if votes fall short. The measure would have a better chance of passing when voting rights to the shares Russell owns with Milton shift to Russell.
Editor’s note: Adds comments from Russell video.
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