Nikola’s electric trucks might look impressive, yet following an investigation from the SEC, everything is not quite as it has been made to appear. Today, the EV start-up has announced it will pay fines of $125M in order to settle fraud charges revolving around the misleading of investors. Amidst the blurry lines of Nikola’s defrauding, there is a wider skepticism building surrounding SPAC’s and the scrutiny regarding investor presentations.
Deemed as ‘misleading’, Nikola made numerous claims that didn’t necessarily match up to fundamental accuracy – which as you can imagine, didn’t sit particularly well with its shareholders. The US SEC made clear today that Nikola’s vehicle ‘tech’ capabilities fell a little short of what was presented; but that wasn’t all, investors were also misled over production levels, order numbers, and financial outlook.
All of the claims lead back to Trevor Milton’s reign over the company, bringing his resignation decision to light once more – again over accusations of ‘intricate fraud’. Nikola is seeking reimbursement from Milton for the costs and damages in connection with the investigation.
As the latest debacle to win the attention of the SEC, investors might be feeling curious as to what this means for companies going public via SPAC’s, but more so, the levels of transparency involved. Compared to traditional IPO’s, blank-cheque group acquisitions often bypass the stringent scrutiny seen elsewhere, resulting in more and more deals based on “incomplete information or just plain old hype”, as pointed out by Gary Gensler, Chair of the SEC.
Gensler’s reference to the ‘hype’ surrounding new SPAC start-ups is something that investors should be wary of. Particularly in competitive emerging markets like EV’s, there might be more than meets the eye than just a pretty first impression.
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Oliver is a financial writer and analyst specialising in the US stock market, with years of personal experience in understanding micro/macroeconomic structures, market trends and fundamental analysis.