CEO and founder of U.S. Nikola, Trevor Milton speaks during presentation of its new full-electric and hydrogen fuel-cell battery trucks in partnership with CNH Industrial, at an event in Turin, Italy December 2, 2019.
Massimo Pinca | Reuters
Embattled electric truck start-up Nikola is paying $8.1 million in attorney fees for ousted founder and chairman Trevor Milton, who left the company in September following fraud claims by a short-seller that prompted federal inquiries.
That helped drive the company’s legal expenses last year to $27.5 million. Most of that, $24.7 million, was spent responding to regulatory probes and other litigation related to the claims by Hindenburg Research, Nikola said in its annual filing Thursday to the Securities and Exchange Commission.
About $1.5 million of Milton’s legal fees were paid in 2020, according to the company. The start-up lost $384.3 million last year, including $147.1 million in the fourth quarter, it said Thursday. Its loss on an adjusted pretax basis was $200.5 million in 2020.
As part of its earnings, Nikola also lowered delivery expectations of its first product called the Tre semitruck from 600 this year to between 50 and 100 due to supplier issues. Shares of the company were level-to-down during afterhours trading after closing Thursday at $19.72 a share, down 6.8% for the day.
“The pandemic has caused significant supply chain disruptions,” Nikola CEO Mark Russell said during an earnings call, specifically citing a battery cell shortage to power its vehicles.
A Nikola spokeswoman declined to comment on whether the company will attempt to recoup any of Milton’s legal fees. In its filing, Nikola said the fees were part of his indemnification agreement with company. It expects to incur additional legal costs this year related to the Hindenburg report, which has led to inquiries by the SEC and Department of Justice.
“We have incurred significant expenses as a result of the regulatory and legal matters relating to the Hindenburg article,” Nikola said in the filing. “The total cost associated with these matters will depend on many factors, including the duration of these matters and any related finding.”
Hindenburg accused Milton of making false statements about Nikola’s technology in order to grow the company and partner with auto companies. The report, titled “Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America,” was released two days after the company announced a deal with General Motors that sent both companies’ shares soaring in September. It characterized Nikola as an “intricate fraud built on dozens of lies” by Milton.
Nikola has denied and disputed many of the accusations, however the company confirmed one of Hindenburg’s biggest claims — that it staged a video showing a truck that appeared to be functional but wasn’t.
An internal investigation by Kirkland & Ellis LLP has been “substantially completed” regarding statements by Milton and the company during that time, according to the filing. No conclusion has been made by the Chicago-based law firm as to whether any statements that may have been inaccurate when made violated any statute, according to the company.