Nikola Corp. (NASDAQ: NKLA) founder Trevor Milton is still a billionaire. But he is giving up a lot in his exit as executive chairman. That includes hundreds of thousands of future stock grants and a two-year, $10 million annual consulting gig that paid more than when he was CEO.
Monday’s announcement by Nikola followed FreightWaves’ report of Milton’s departure. The press release described it as a selfless act for the good of the company. The release did not mention a scathing report by short seller Hindenburg Research published Sept. 10 that accused Milton of lying about the company’s technology.
An 8-K filing with the U.S. Securities and Exchange Commission on Monday suggests a different and far more nuanced arrangement.
Giving up a lot in exiting
Nikola management declares Milton’s departure “was not a termination.” But other than being an “ad hoc” consultant until the end of the year, he is out. And Milton agreed he won’t bad mouth or sue the company.
He gave up his board seat and nearly 4.9 million performance-based stock units that were granted on Aug. 21. He must toe the company line by voting his 91.6 million shares the way the board wants. His shares were worth about $2.5 billion Monday.
Milton also agreed to cooperate with any investigations, such as reported interest by the SEC and the U.S. attorney for the Southern District of New York. Neither of those agencies has confirmed media reports they are looking into Nikola or the Hindenburg Research report.
His Aug. 26 Founder’s grant of 6 million shares to 40-some early employees will go forward as will a grant of 1 million shares he gave to 350 employees earlier this month. Nikola will reimburse Milton for up to $100,000 for three months of round-the-clock security for him and his family. The company will accelerate vesting and pay out of 600,000 restricted stock units granted in August.
According to the filing, Milton agrees to do nothing to harm the company or compete with it. He must seek permission before talking about Nikola publicly. His hyperactive tweeting and Instragram posts intended to build buzz for the company instead contributed to his downfall by growing a schism between Nikola backers and detractors.
GM sticks with Nikola
One of Milton’s final acts was a joint announcement with General Motors of a partnership under which GM would build the battery-electric Badger pickup truck. The deal included Nikola’s purchase of batteries and fuel cells for its heavy-duty tractors. Nikola earlier had said it was developing its own technology for both.
In a statement Monday, GM said it expects to close the agreement under which it becomes an 11% owner of Nikola through the creation of 47 million new shares priced at $41.93. Based on the depressed price of Nikola shares, GM could seek to rework the deal.
While GM likes the idea of bulking up its own electric pickup truck production with the Badger, the electric pickup space is very crowded. GM itself invested $25 million in a commercial electric pickup that startup Lordstown Motors Corp. is planning to build in a former GM car plant in northeast Ohio.
The Badger’s association with Milton also could make it expendable. Nikola CEO Mark Russell said Nikola was not even considering an electric pickup a year ago.
Nikola has 80,000 “expressions of interest” and a few thousand deposits. But the enthusiasm pales in comparison to the CyberTruck from rival Tesla Inc. (NASDAQ: TSLA). Selling batteries and fuel cells, two areas of deep GM expertise, for a segment in which it does not compete today could be a better play.
“We will work with Nikola to close the transaction we announced nearly two weeks ago to seize the growth opportunities in broader markets with our Hydrotec fuel cell and Ultium battery systems, and to engineer and build the Nikola Badger,” GM’s statement said.