Editors Note: CORRECTS lockup expiration date to Tuesday from Monday
Nikola Motor Corp. (NASDAQ: NKLA) founder Trevor Milton no longer makes decisions for the startup electric truck maker. But he still wields significant influence. On Tuesday, he can sell his 91.6 million shares, about a quarter of all outstanding shares. What will he do?
Milton isn’t saying.
If he sells a large portion or all of his shares, the price of the already volatile stock likely would fall. A sudden glut could overwhelm the number of prospective buyers. Nikola shares closed Friday at $27.93, down 7.64%.
“I can’t comment for Trevor,” Nikola CEO Mark Russell told CNBC on Tuesday. “But we believe as we execute on our milestones and our business plan, we’re going to reward our long-term-focused shareholders.”
An attempt to reach Milton through his representatives received no response.
Preparing for a selloff
Nikola is ready for the worst. Large strategic investors, including manufacturing partner CNH Industrial N.V. (NYSE: CNI), fuel cell supplier Robert Bosch and solar panel maker Hanwha Group, are extending their lockup through April 30, 2021.
A total of 136.5 million of 384 million total shares are covered by the extension, according to Nikola’s quarterly filing with the U.S. Securities and Exchange Commission (SEC).
Milton received $70 million in June in a cash-out of private shares he held when Nikola merged with special purpose acquisition company (SPAC) VectoIQ. His severance package is worth millions more, including just over $1 million for using his private plane to fly to and from company headquarters in Phoenix, Arizona, to his home in Utah.
There has been no sign of Milton in public since he resigned as executive chairman and gave up his board seat Sept. 20. Ten days earlier, short seller Hindenburg Research published a scathing 67-page report accusing Milton of fraud and deception by overstating technology claims before the company went public.
Current Nikola executives and Milton have received subpoenas from federal and New York state authorities investigating the Hindenburg claims. Nikola said it is cooperating.
Bye-bye Badger?
The Hindenburg accusations on Sept. 10 came two days after Nikola announced a manufacturing partnership and supply deal with General Motors Co. (NYSE: GM). The automaker would provide battery and fuel cell technology and build the Nikola Badger electric pickup truck in exchange for an 11% stake in the company.
The deal was supposed to close Sept. 30. But the Hindenburg report and resulting negative publicity delayed the closing. Talks continue toward a Dec. 3 deadline when either party can walk away. Nikola’s Nov. 9 SEC filing said terms of the agreement are subject to change.
Nikola shares have risen and fallen based on non-committal comments from GM and Nikola executives. The biggest change to the deal could be canceling the Badger pickup. Nikola initially agreed to pay GM $700 million in the manufacturing agreement. That is money for construction of its own plant for heavy-duty trucks in Coolidge, Arizona.
The Badger pickup, which Milton hyped to build buzz for the company, exists only in photography. Milton said it would be shown at Nikola World in early December. That event was postponed because of the pandemic. The Badger won’t be built without a manufacturing partner, Russell said.
GM tech for second-generation products
GM originally agreed to build the Badger at a plant it is converting to electric vehicle production in the Detroit area. It also agreed to take Nikola shares worth $2 billion in exchange for its Ultium batteries and Hydrotec fuel cells. Russell characterizes both as second-generation technologies.
Nikola has a joint venture with CNHI’s Iveco subsidiary to produce the battery-electric Tre day cab in Germany beginning next year. Bosch developed the fuel cell stacks for the Tre. They could be used for the Nikola Two scheduled for production in Arizona in 2023.
That means a GM deal could be smaller than was revealed on Sept. 8. Or it might not happen.
“[The Badger] is not a strategic initiative for Nikola and it could drain the company of cash needed for the Class 8 truck initiatives,” J.P. Morgan analyst Paul Coster wrote in an investor note Tuesday. “GM may want more stock to compensate for the diminished scope.”
Related articles:
Talks continue but Nikola plans beyond uncertain GM deal
News analysis: Evidence mounts that Nikola Badger is roadkill