Shares in Nikola are diving 23% in the pre-market session after its founder Trevor Milton stepped down as executive chairman of the board amid allegations that the electric truckmaker is an “intricate fraud built on dozens of lies” and misled investors about its business prospects.
Nikola (NKLA) said that Milton approached the Board of Directors and proposed to voluntarily leave as executive chairman. The Board accepted his proposal, and Stephen Girsky, former General Motors Vice Chairman and a member of Nikola’s Board, has been appointed Chairman of the Board, with immediate effect.
“Nikola is truly in my blood and always will be, and the focus should be on the company and its world-changing mission, not me” said Milton. “We’ve built a deep bench of talent over the years, and I am confident that Nikola’s Chief Executive Officer, Mark Russell, and the rest of the leadership team will advance our goal of making Nikola the global leader in zero-emissions transportation.”
The departure follows a report by Hindenburg Research this month, which claimed that the short-seller had gathered extensive evidence – including recorded phone calls, text messages, private emails and behind-the-scenes photographs – detailing dozens of false statements by Milton, concluding that it has “never seen this level of deception at a public company, especially of this size”. In response, the electric truckmaker had issued a lengthy statement to set the “record straight” on the “false and defamatory” report. NKLA shares have dropped more than 13% over the past month.
“We remain committed to delivering on our objectives and creating value for our shareholders,” said Nikola CEO Mark Russell. “Along with the rest of the management team, I will continue to work closely with Steve and the Board to advance Nikola’s vision for the future. Our priorities remain unchanged and, in collaboration with our partners, we are laser-focused on executing on our strategic initiatives and laying the groundwork to become a vertically integrated zero-emissions transportation solutions provider.”
Since Nikola went public on June 4 via a merger with VectoIQ, the stock soared from below $15 to around $50 at the start of the month, following the announcement that General Motors will take a 11% stake in the company as part of a partnership to build electric pickup trucks. Shares in the company, which plans to manufacture hydrogen-electric trucks but has not yet produced or sold any vehicles, have plunged more than 48% over the past 3 months. (See NKLA stock analysis on TipRanks)
Wedbush analyst Daniel Ives last week maintained a Hold rating on NKLA with a $45 price target ($32 price target) saying that the company “remains a “prove me” stock in the eyes of investors with the bears jumping on this story.
“We continue to believe seeing the forest through the trees that Nikola is a story stock now and its all about execution looking ahead through 2023,” Ives wrote in a note to investors. “If the team can successfully build out its Arizona factory, morph prototypes into models (both on Badger and trucking front), lay the groundwork for its charging network, and catalyze delivery trucking orders with an attractive gross margin structure then the opportunity for NKLA is massive and the stock will reflect this dynamic.”
“However, clearly there is much wood to chop to get there over the next 12 to 18 months,” the analyst added.
For now, NKLA has 5 analysts covering the stock, who are divided between 2 Buy ratings and 3 Hold ratings adding up to a Moderate Buy consensus. The $55.75 average price target puts the upside potential in the shares at another promising 63% over the coming year.
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