Nikola Corp. CEO Mark Russell testified Monday that founder Trevor Milton went on a publicity “blitz” to attract retail shareholders to the startup’s stock because he was dissatisfied with the performance of bankers hired to promote the company.
Milton, 40, is on trial on four counts of fraud related to lying about the company’s technology achievements and progress to boost Nikola’s stock price. If convicted of defrauding investors, he could receive a maximum 25-year federal prison sentence.
Assistant U.S. Attorney Jordan Estes asked Russell under direct examination whether he discussed Nikola’s stock price with Milton, Russell became executive chairman when Nikola went public in June 2020 and Russell became CEO.
“He was very excited when it went up, very focused on it,” testified Russell, who will retire as CEO in January. “He would say, ‘I bring the retail investors.’ I would say, ‘I don’t really want them.’ He would say he could use social media to reach them.”
Russell cautions Milton on accuracy
Estes asked Russell whether he had discussions with Milton about the need to be accurate.
“I told him as executive chairman, we would review his statements,” Russell said.
Estes asked: “How would you describe the volume of Mr. Milton’s public statements?
Russell responded: “He went on a blitz.”
Russell was the first witness to testify in the 6-day-old trial that Milton, as the government alleges, targeted retail investors through near omnipresence on Twitter and through interviews on podcasts and with business media.
“Trevor was upset with the bankers,” Russell said. “He said, ‘They don’t know how to sell.’”
Nikola’s stock price rose dramatically in the weeks after the company went public via special purpose acquisition company VectoIQ in June 2020. In September, the shares lost 24% of their value in two days. That came after short seller Hindenburg Research issued a report maintaining Nikola was an “intricate fraud” built on “an ocean of lies” by Milton.
Nikola’s board without Milton present met after the Hindenburg report, Russell testified. Milton resigned 10 days after the report. In some of his final tweets before he quit, Milton promised a full rebuttal of Hindenburg’s allegations. It never materialized. Hindenburg made untold amounts of money by betting the price of Nikola stock would fall, which it did.
Hindenburg received help from former Nikola contract engineer Paul Lackey, who filed a whistleblower complaint about Nikola with the Securities and Exchange Commission. Lackey received $600,000 from Hindenburg for information.
He could receive a multimillion-dollar reward depending how much the SEC collects in fines from Milton. Nikola agreed to pay the SEC a $125 million fine but admitted no wrongdoing.
Qualification questions about Nikola outside directors
Russell also alluded to concerns the board had about the lack of qualifications of its independent directors, including Milton’s father.
“It was an issue of governance,” Russell said. “And none of the independent board members had public company experience.”
Russell joined Nikola as president in 2019 after a career at global diversified metals manufacturer Worthington Industries. Estes asked Russell whether he had a prearrangement with Nikola to become CEO. Milton and Russell met when Milton sold Worthington Industries, an earlier business he founded.
Russell will continue his testimony Tuesday.
A shout-out to Russell from his successor
Meanwhile, in Hannover, Germany on Monday, Russell’s chosen successor, Michael Lohscheller, revealed the production-intent Class 8 hydrogen-powered fuel cell truck that Nikola expects to begin producing at a plant in Coolidge, Arizona, in the second half of 2023.
In remarks at IAA Transportation 2022, Lohscheller gave a shout-out to Russell as the person most responsible for getting the company to where it is manufacturing battery-electric Class 8 trucks for sale. Nikola and European manufacturer Iveco entered a joint venture in 2019. The Iveco S-Way is the basis for the Nikola Tre.
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