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Nikola falls short again in proxy fight to increase share count

Financial flexibility at stake as electric truck maker beats bushes for proxies

After three tries, Nikola Corp. remains short of the votes it needs to win a proxy fight with indicted founder Trevor Milton 

“Thanks to the overwhelming support of our stockholders, we are getting closer to securing the number of votes needed … with less than 1.6 million shares still needed,” said Mark Russell, Nikola’s CEO. More than 208 million shares have voted in favor of the proposal including 5 million in the last two weeks.

But Nikola has to grind for the remaining shares it still needs. More than 105 million shares — about 25% of all equity — remains unvoted. Many of those belong to small holders who could have sold them.

Getting approval for the higher number of shares is crucial to Nikola’s ability to raise money for its electric truck and hydrogen manufacturing businesses. It has less than 33 million uncommitted shares remaining from its original 600 million-share authorization.

Nikola now has adjourned its annual meeting three times since Milton voted his holdings and a block of shares he co-owns with Russell against the proposal

Milton owns about 11% of outstanding Nikola shares. He faces significant dilution of his stake if the proposal passes.

Pleading for proxies

Nikola hired a proxy solicitation firm that has pleaded with shareholders almost daily since the proposal fell short. Unlike other proposals that required only a majority of votes cast, the share authorization issue needs 50% plus one vote of all outstanding shares. Milton accounted for about 85% of the no votes on the proposal.

Nikola adjourned the virtual annual meeting on June 1, June 30, and again Monday. That sets up a fourth try on Aug. 2

Nikola declined to disclose how much it is spending to find and persuade shareholders to vote.

The average proxy fight costs about $1.5 million, Jay Kesten, a law professor at Florida State University and a corporate governance and finance expert, told FreightWaves. A smaller company, like Nikola, might spend less.

“I actually think this is a pretty good thing when companies, especially smaller companies, see fit to reach out directly to their shareholders,” Kesten said. “It makes the process more transparent and involves them in the corporate governance piece of it.”

Nikola’s shareholder outreach has included webinars by Chairman Steve Girsky and Russell.

Milton’s testing of Nikola

Milton, who faces a federal trial on fraud charges in September, has been a thorn in the company’s side since he stepped down as executive chairman and resigned from the board in September 2020 following a blistering report by a short seller. Several of the allegations Milton denied were found to be true during a company investigation.

Nikola has spent tens of millions of dollars on Milton’s defense against charges he lied about the company’s technological progress and prowess. It also agreed to pay a $125 million fine to the Securities and Exchange Commission on the same issues. The SEC is in mediation with Milton to recover the fine and other expenses.

Last week, the company intervened in the criminal case to stop Milton from asking about conversations Chief Counsel Britton Worthen had with other employees. Nikola earlier agreed to a government request to allow Worthen’s communications with Milton to be used in the trial.

Prosecutors expect Milton to use an “advice of counsel” defense, effectively blaming his attorneys for his troubles. The trial is scheduled to begin Sept. 12 in the U.S. District Court for the Southern District of New York.

Indicted Nikola founder wants to use company’s internal conversations in trial

Nikola founder’s fraud trial delayed until Sept. 12

Commentary: The long shadow of Nikola founder Trevor Milton

Click for more FreightWaves articles by Alan Adler.

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Alan Adler

Alan Adler is a Detroit-based award-winning journalist who worked for The Associated Press, the Detroit Free Press and most recently as Detroit Bureau Chief for Trucks.com. He also spent two decades in domestic and international media relations and executive communications with General Motors.