Does Change at the Top Turn Down the Heat on Nikola?

Late Sunday night, Trevor Milton, founder and executive board chair of Nikola Corp. (NASDAQ: NKLA) stepped down from his role with the truck maker, resigning from the company’s board of directors. In the announcement, Milton said that the “focus should be on the Company and its world-changing mission, not me.”

That makes sense. After all, it’s Milton’s history and his actions at Nikola that were the centerpiece of a short seller report earlier this month that torched the stock. The report from Hindenburg Research alleges that Milton told “dozens of outright lies” to form partnerships with vehicle makers like General Motors that are desperate “to catch up” with leading EV maker Tesla. Hindenburg also cast doubt on the company’s claim of a revolutionary battery technology.

In the Sunday announcement, the company announced that Stephen Girsky, a member of Nikola’s board, would take over immediately as board chair. Girsky is former vice-chair of GM and a managing partner at VectolQ, the special-purchase acquisition company (SPAC) that combined with Nikola in a reverse merger in June of this year. He also serves on the boards of U.S. Steel and Brookfield Business Partners.

Just days after Nikola’s initial public offering, Milton’s stake in the company, then trading at around $80 a share, was valued at $9 billion. His stake in the company is locked up for about a year.

The short seller report ginned up some interest from the U.S. Securities and Exchange Commission (SEC), which reportedly has begun an investigation into allegations that the company deceived investors. The U.S. Department of Justice also is reported to have begun a separate investigation.

While Milton’s departure was almost certainly necessary, is it sufficient to restore confidence in Nikola? Pending federal investigations are always an albatross and it’s hard to see any difference this time.

In a tweet last night, Milton said he intends to “defend myself against false allegations leveled against me by outside detractors.”

Nikola shares traded down about 30% in Monday’s premarket session to $24.05, after closing Friday at $34.19. The stock’s post-IPO range is $10.27 to $93.99, and the consensus price target is $55.75.

Since Hindenburg’s report was released on September 10, shares had fallen by more than 19% as of Friday’s close. Before the bell Monday, shares are down more than 43% since that date.