Nikola, Founder Trevor Milton Subpoenaed By DOJ

Nikola Corporation NKLA, in a regulatory filing on Monday, disclosed that the company is facing legal proceedings from multiple federal bodies, stemming from the short seller allegations in September.

The electric vehicle company, along with current and former employees, has received a myriad of subpoenas from the U.S. Securities and Exchange Commission, the Department of Justice, the Attorney Office for the Southern District of New York, and the New York County District Attorney’s Office.

What Happened: Monday’s disclosure was the first instance when the company acknowledged the federal investigations, the Financial Times reported. On Sept. 19, Grand jury subpoenas were issued by the Justice Department against Nikola and its founder Trevor Milton, as per the EV maker's SEC filings.

A few days before the incident, the SEC had issued subpoenas against the company, along with five of its employees, in connection to the allegations by Hindenburg Research. The SEC later issued additional summons, initially to three of the company’s officers and later extended them to Nikola Directors.

Nikola is also facing multiple class-action lawsuits in California, Arizona, Eastern District of New York, and Delaware over allegedly making misleading and/or false statements.

Why Does It Matter: In the earnings report for the quarter ending Sept. 30, Nikola clarified that business operations since inception have been financed through the sale of redeemable convertible preferred stock and common stock. Cash and cash equivalents balance of $907.5 million, as of Sept. 30, parked in money market funds, supported liquidity requirements.

The company has recorded zero revenue from sales. Revenue generation from core business is anticipated after its product line of electric trucks hit the market in 2021.

Nikola is in talks with General Motors Company GM since September and the latter has promised better clarity around the status of the deal before the Dec. 3 deadline. The terms of the deal revolve around the production of the pickup truck — Nikola Badger, and a fuel cell supply agreement.

Price Action: After a 4.85% drop during trading hours, NKLA stock gained 2.25% in the after-market hours to close at $19.05.

Photo courtesy: Nikola Corp.