Struggling electric vehicle manufacturer Nikola has officially filed for Chapter 11 bankruptcy protection after earlier warnings of a potential cash shortage. Once a highly-touted startup, Nikola’s trajectory was derailed by scandal, culminating in the conviction of its founder in 2022 for deceiving investors regarding the company’s technology.
During the trial of Trevor Milton, it was revealed that a video purportedly showcasing a functional prototype truck driving along a desert highway was actually a non-operational Nikola vehicle being rolled downhill. Despite this, Nikola had enjoyed significant hype – in 2020, its valuation soared to approximately $30 billion, surpassing that of Ford Motor Co.
Nikola’s bankruptcy filing took place in the United States Bankruptcy Court for the District of Delaware, with the company also seeking approval to proceed with an auction and sale of its assets. With around $47 million in cash reserves, Nikola Corp. intends to maintain limited service and support operations for existing vehicles, including fueling services, at least until the end of March, pending court authorization. However, additional funding will be required to sustain these functions beyond that timeframe.
CEO Steve Girsky acknowledged the challenges faced by Nikola in light of market and macroeconomic factors affecting the electric vehicle sector. Despite recent efforts to secure funding, decrease liabilities, and conserve cash, the decision was made to pursue Chapter 11 as the most viable path forward at this juncture.
Founder Trevor Milton’s conviction in December 2023 on fraud charges, resulting in a four-year prison sentence, marked a significant downfall for the company. Milton was accused of fabricating claims about Nikola’s production of emissions-free 18-wheel trucks, leading to substantial financial losses for investors. Notably, the SEC previously settled a civil case with Nikola in 2021 for $125 million, although the company did not admit any wrongdoing.
Alongside its internal troubles, Nikola has encountered a challenging landscape in the electric vehicle industry, with declining sales and shifting regulatory dynamics. President Donald Trump’s actions to roll back elements of President Joe Biden’s EV initiatives, including revoking targeted goals and tax credits, have added further uncertainty to the sector.
Nikola, headquartered in Phoenix, Arizona, experienced a sharp drop in its stock value, plummeting by over 49% prior to the market opening on Wednesday.
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