Nikola Corp. founder Trevor Milton linked his social media posts to the newly public electric truck maker’s rising stock price, CFO Kim Brady testified Friday, supporting the government’s fraud case against Milton.
Milton faces a maximum of 25 years in prison if convicted of the most serious of four federal fraud charges. The government claims Milton defrauded investors by lying about the company’s technology accomplishments and the promise of future products to inflate the stock price.
Brady joined Nikola in 2017 after a 20-year career in investment banking,. Assistant U.S. Attorney Matthew Podolsky asked him whether Milton’s statements about the company he founded in 2015 were accurate.
“No,” Brady responded. “They could be inaccurate or exaggerated.”
CFO: Nikola a ‘story stock’
Brady said he spoke with Milton about his habit of tweeting and appearing on social media podcasts, warning him about courting retail investors.
“We were concerned. Nikola was a story stock,” Brady said. “So, we had to be careful. Retail investors do not have experience.”
He later explained that a story stock has no financial fundamentals.
“So there is speculation, triggered by what the management may say,” Brady said. “I told Trevor it had to be accurate.”
Podolsky asked Brady whether Milton linked his statements to the company’s stock price.
“He would point at a rise, to what he had said,” Brady said.
The price of Nikola shares soared in the weeks after it went public in June 2020 via sponsorship by special purpose acquisition company VectoIQ. In testimony earlier this week, CEO Mark Russell testified that Milton was unhappy with the company bankers’ effectiveness in attracting qualified investors to Nikola.
Milton unprepared’ to be CEO of a publicly traded company’
Brady said institutional investors expressed concern that Milton “was not prepared to be CEO of a publicly traded company.” They wanted a lockup on Milton’s shares, preventing him from immediately selling when the company went public. At the time Milton owned about 25% of Nikola shares.
Milton sought and received board permission to cash out $70 million worth of his shares before the SPAC business combination concluded, resulting in Nikola’s listing on the Nasdaq. Milton used some of that money along with Nikola stock options to purchase a Utah ranch.
The use of stock options in the real estate deal underlies the fourth charge against Milton added in June.
Under cross-examination, Mukasey asked Brady about his statement to investor Hanwha Group, a South Korea-based maker of solar panels, that “Nikola is building” with apparent reference to a $30 million purchase of electrolyzers from Norway’s Nel ASA, a Norway-based maker of fuel cells.
Throughout the trial, the defense has tried to show jurors on cross-examination that prosecution witnesses against Milton made misstatements about Nikola’s progress and prowess.
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Nikola CEO testifies Tevor Milton went on ‘blitz’ to attract shareholders
Trevor Milton cast as greedy villain and betrayal victim in fraud trial
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