Troubled electric vehicle maker Nikola has recently filed for Chapter 11 bankruptcy protection. This move follows warnings about running out of cash earlier this year.
Once a promising startup, Nikola made headlines with its innovative approach to electric vehicles (EVs). However, the company fell from grace after its founder, Trevor Milton, was convicted of misleading investors about their technology in 2022.
During Milton’s trial, prosecutors revealed that a flashy company video of a truck driving down a road actually showed a non-functioning prototype that had been rolled down a hill. Despite this scandal, Nikola’s value soared to around $30 billion in 2020, even surpassing the market cap of Ford.
Recently, Nikola produced 83 trucks in the third quarter but reported a staggering net loss of nearly $200 million. In the previous quarter, it made only 77 trucks, with losses of almost $134 million.
The company filed for bankruptcy in Delaware and is seeking court approval to auction and sell its business. Nikola currently has about $47 million in cash.
Under its bankruptcy plan, Nikola plans to continue some limited service for vehicles on the road, including fueling operations, until the end of March, pending court approval. More funding will be necessary to sustain these services afterward.
Nikola’s CEO, Steve Girsky, stated that the company faced various market challenges impacting operations. Despite efforts to raise funds and cut costs, these measures proved insufficient.
“The Board believes Chapter 11 is the best path forward,” Girsky remarked.
Milton, once a celebrated founder, was sentenced to four years in prison in December 2023 for exaggerating the company’s production claims. Prosecutors painted him as a fraudster after he misled investors about the capabilities of Nikola’s trucks, which he falsely claimed were revolutionary vehicles. In reality, some were just rebranded General Motors products.
Milton resigned in 2020 amid fraud allegations that sent Nikola’s stock tumbling. In 2021, the company agreed to pay $125 million to settle a civil case with the SEC without admitting wrongdoing.
Nikola is also facing external challenges. The sales slump in the EV market is making survival tougher. Recent political shifts could worsen the landscape for electric vehicle makers. Former President Trump has vowed to eliminate certain initiatives that promote EV sales, including potential tax credits for buyers.
Nikola’s share prices have plummeted, falling below $2 late last year and dropping another 40% recently. The company’s future remains uncertain as it navigates through these turbulent times.
