Trevor Milton, CEO and founder of American Nikola, speaks during a presentation of his new all-electric and hydrogen fuel cell battery trucks in partnership with CNH Industrial at an event in Turin, Italy on December 2, 2019.
Massimo Pinca | Reuters
Competitive electric vehicle startup Nikola is paying $ 8.1 million in legal fees for ousted founder and chairman Trevor Milton, who left the company in September over a short seller fraud case that led to federal investigations.
This helped increase the company's legal expenses to $ 27.5 million last year. Most of that, $ 24.7 million, was spent answering regulatory investigations and other litigation related to Hindenburg Research's claims, Nikola said in its annual filing Thursday with the Securities and Exchange Commission.
According to the company, around $ 1.5 million in Milton's legal fees were paid in 2020. The start-up lost $ 384.3 million last year, including $ 147.1 million in the fourth quarter, it said on Thursday. Adjusted pre-tax loss for 2020 was $ 200.5 million.
As part of the result, Nikola also lowered delivery expectations for its first product, called Tre Semitruck, from 600 this year to 50-100 due to supplier issues. The company's shares fell at $ 19.72 each during after-hours trading after Thursday's close Share, down 6.8% for the day.
"The pandemic has caused significant supply chain disruption," Nikola CEO Mark Russell said during a call for earnings, specifically referring to a shortage of battery cells to power his vehicles.
A Nikola spokeswoman declined to comment on whether the company will attempt to recoup Milton's legal fees. In his filing, Nikola said the fees were part of his compensation agreement with the company. Additional legal costs are expected this year related to the Hindenburg report, which led to investigations by the SEC and the Justice Department.
"We incurred significant costs due to the regulatory and legal issues surrounding the Hindenburg article," Nikola said in the filing. "The total cost of these matters will depend on many factors, including the duration of these matters and the associated determination."
Hindenburg accused Milton of making false statements about Nikola’s technology to grow the company and partner with auto companies. The report, titled Nikola: How to Partner an Ocean of Lies with America's Largest Automaker, was released two days after the announcement of a deal with General Motors that skyrocketed both companies' shares in September . It characterized Nikola as "an intricate scam based on dozens of lies" by Milton.
Nikola has denied and denied many of the allegations, but the company confirmed one of Hindenburg's biggest claims – that it staged a video showing a truck that appeared to be functional but not working.
An internal investigation by Kirkland & Ellis LLP into statements made by Milton and the Company during this period has "substantially been completed". The Chicago-based law firm has not reached a conclusion whether statements that may have been inaccurate when filed are against any law, the company said.