Nikola founder Trevor Milton can promote his 91.6 million shares from Tuesday
Trevor Milton, CEO and Founder of US Nikola, attends a dinner showcasing his new all-electric and hydrogen fuel cell battery trucks in partnership with CNH Industrial at an event on December 2, 2019 in Turin, Italy.
Massimo Pinca | Reuters
The ousted Nikola founder and chairman Trevor Milton is the company’s largest shareholder with more than a quarter of the start-up shares and can sell them all from Tuesday.
Milton, who disappeared from the public eye and deleted all social media accounts after stepping down in a haze of controversy in September, has once again caught Wall Street’s attention. He owns approximately 91.6 million Nikola shares valued at approximately $ 1.9 billion based on Monday’s closing price, which he has traded for the first time since the company went public in early June.
There are up to 166 million stocks, including Milton’s, held by other insiders and early investors that will be listed for trading starting Tuesday. Milton is by far the largest single shareholder in Nikola, with around 360.9 million shares outstanding in the company.
A stock selloff could add to an already volatile week for Nikola stock. Shares fell 26.9% to $ 20.41 on Monday after Nikola announced a discounted deal with General Motors. GM abandoned a stake in the electric truck maker and planned to produce the Badger, an electric pickup truck that would be the company’s first foray into the consumer market.
Nikola shares fell as much as 18.3% in strong trading Tuesday morning. By 11:00 a.m. on Tuesday, more than 48 million Nikola shares had traded.
Continue reading: Nikola shares see another ugly sell-off in volatile trading as the insider lockout period expires
The company promises to manufacture all-electric hydrogen fuel cell tractor units, which GM has agreed to ship, although Nikola is not yet mass-produced.
Milton’s fortune is believed to be tied up in Nikola stock, which has been cut by 40% since he left the company after allegations of fraud and sexual abuse surfaced. A Milton spokesman declined to say what he plans to do with the shares. The company also declined to comment on the end of the lockdown period.
RBC Capital Markets analyst Joseph Spak predicts that Milton will sell some but not all of its stocks.
Any sell-off of these shares could “generate considerable additional selling pressure in the near future,” wrote Emmanuel Rosner of Deutsche Bank in a statement to investors on Monday. Rosner, who maintains his hold rating on the stock, warned investors early Monday that “major volatility” was impending for Nikola shareholders.
Several analysts said the scaled-down deal would weigh on Nikola’s shares in the short term, but is of little relevance to the company’s long-term plans. JPMorgan analyst Paul Coster even said a stock pullback could be “a good buying opportunity”.
The stock is already under pressure after GM dropped its stake in Nikola, said Wedbush analyst Dan Ives. He reiterated an underperformance rating and is sticking to his target price of $ 15 on Nikola.
“This went from a game-changer deal for Nikola to a good delivery partnership, but there is nothing to write home about and the street will be disappointed accordingly, along with ongoing concerns about the bridge,” said Ives .
A total of around 161 million common shares will be approved for sale as of Tuesday, according to Nikola’s SEC filing in the third quarter. Depending on the company’s share price, another 5 million shares may be admitted for sale. Milton owns 6 million shares of “founder options” that he could issue to early employees.
More Nikola shares were expected to be admitted to trading on Tuesday. However, investors holding 136.5 million shares have agreed to extend their lock-up period until April 30th. That includes 39.8 million shares held by a company controlled by Nikola CEO Mark Russell but jointly owned with Milton, Russell told CNBC last week.
Milton stepped down after the Department of Justice and the Securities and Exchange Commission began investigating fraud allegations by short seller Hindenburg Research in September.
Hindenburg accused Milton of making false statements about Nikola’s technology to grow the company and partner with auto companies. The report, titled “Nikola: How to Partner an Ocean of Lies with America’s Largest Automaker,” was released two days after the announcement of the first $ 2 billion deal with GM that will bring the shares of both companies in skyrocketed. It characterized Nikola as “an intricate scam based on dozens of lies” by Milton, who has denied several of the allegations.
In addition to the federal investigation, two women have since filed sexual abuse complaints against Milton with the Utah authorities. Both allegations were more than 15 years old, but separately concerned Milton’s cousin and an office assistant.
Through a spokesman, Milton strongly “denied” the women’s allegations.
– CNBC’s Michael Bloom contributed to this report.