Electric truck startup Nikola late Sunday said founder Trevor Milton has resigned, a departure that comes amid allegations of fraud and just two weeks after signing a $2 billion partnership with General Motors.
Milton said in a message to Nikola employees that he is stepping aside because "the focus should be on the company and its world-changing mission, not me." He also said he would defend himself against accusations that the company made false claims about its vehicles, allegations that Nikola rejects.
Nikola shares plunged as much as 27% in pre-market trading on Monday morning.
A report from Hindenburg Research from September 10 said the company's success was "an intricate fraud" and based on "an ocean of lies" including showing a truck rolling downhill to give the impression it was cruising on a highway, and stencilling the words "hydrogen electric" on the side of a vehicle that was actually powered by natural gas.
Hindenburg said it had taken a short position in Nikola stock, which means it could profit if the stock goes down.
Milton's departure is "a shocking move," wrote Wedbush analyst Daniel Ives in a Monday note to clients. "Trevor stepping down voluntarily at Nikola will be perceived by the Street as a major near-term gut punch for the company's lofty EV ambitions as he plays a key role strategically in driving the company's vision."
Nikola issued a statement saying the Hindenburg report was "replete with misleading information and salacious accusations directed at our founder and chairman." The company has hired an attorney to evaluate potential legal recourse.
Under the partnership announced with GM, the Detroit-based automaker would take an 11% ownership stake in Nikola and would engineer and build Nikola's Badger hydrogen fuel cell and electric pickup truck.
In exchange for the 10-year deal, GM was to get $2 billion worth of Nikola's newly issued common stock that will come in three increments through 2025.
News of the deal on September 8 sent shares of both companies surging despite a broader market downturn. GM has been under pressure from Wall Street to more quickly exploit its electric vehicle technology, while the GM deal gave the startup added credibility, according to analysts.
Under the deal, Nikola will be responsible for the sales and marketing of the Badger, built on GM's new battery electric truck underpinnings and using GM fuel cell and battery technology. GM also will supply batteries for other Nikola vehicles including heavy trucks.
Nikola said that former GM Vice Chairman Stephen Girsky, a member of the board, would replace Milton.