Misleading Claims and PR Crises

2021-08-02 by Ronn Torossian

In an indictment that was unsealed in New York recently, the founder of Nikola, Trevor Milton, is currently facing federal charges about lying to the investors of the company. According to the indictment, Milton had been making misleading and false statements for about a year, about practically every aspect of the business itself. Milton’s business is focused on developing hydrogen and electric-powered trucks. According to the US attorney for the Southern District of New York , Milton made a number of false and misleading statements about his company. Those statements included things that could help him generate more demand for stock in his company, which ended up being a key element in driving a number of retail investors to buy up as many stocks in the company as possible.

Additionally, according to the attorney, Milton managed to take advantage of the looser rules regarding taking companies public. He ended up using SPAC instead of the traditional IPOs when taking Nikola public. With an IPO, the executives of a company aren’t able to make any statements about their companies, which hadn’t been previously disclosed in filings for the SEC. However, the attorney stated that Milton actually wanted to control the situation and wasn’t looking to work with bankers who would be telling consumers what the company was actually like. This is precisely the feature that he managed to exploit to his own benefit by getting plenty of investors on board and buying stocks.

In fact, at the height of Milton’s stake in the company, his shares were worth $7 billion, even though the company hadn’t made any sort of revenue yet. Furthermore, the prosecutors stated that according to previously made claims, the company had a fully functioning semi-truck prototype, yet Milton allegedly knew that the prototyping in question was inoperable. Milton had also claimed that Nikola was going to be producing hydrogen at a reduced cost, yet the company had never produced any sort of hydrogen at all.

A number of these allegations of misleading information were first made in September 2020, which ended up causing the shares of the company to decrease, and then Milton resigned from his position later that same month.

The company itself decided to issue a statement for the public, as well as its investors. stat  It stated that Milton was no longer going to be involved with any of the company’s operations. Additionally, the company has been cooperating with all of the government’s requests since the allegations were made public, which has been doing positive things for the company’s public perception and reputation.

Although the shares are still down from the record high they had last year, the company is doing everything it can to navigate the situation successfully. This is precisely what other companies can take note of, and learn from, as working with government officials and investigations are crucial to a company’s success.

Ronn Torossian is CEO of 5wpr, a leading crisis pr agency.

Ronn Torossian: Insights from a Native New Yorker and CEO of 5WPR

Ronn Torossian is the founder and CEO of 5W Public Relations, one of the largest independently-owned PR firms in the United States. With over 20 years of experience crafting and executing powerful narratives, Torossian is one of America's most prolific and well-respected Public Relations professionals. Since founding 5WPR in 2003, he has led the company's growth, overseeing more than 250 professionals in the company's headquarters in midtown Manhattan. With clients spanning corporate, technology, consumer and crisis, in addition to digital marketing and public affairs capabilities, 5WPR is regularly recognized as an industry leader and has been named "PR Agency of the Year" by the American Business Awards on multiple occasions. Throughout his career, Torossian has worked with some of the world's most visible companies, brands and organizations. His strategic, resourceful approach has been recognized with numerous awards including being named the Stevie American Business Awards 2020 Entrepreneur of the Year, the American Business Awards PR Executive of the Year, twice over, an Ernst & Young Entrepreneur of the Year semi-finalist, Metropolitan Magazine's Most Influential New Yorker, a 2020 Top Crisis Communications Professional by Business Insider, and a recipient of Crain’s New York 2021 Most Notable in Marketing & PR. Torossian is known as one of the country's foremost experts on crisis communications, and is called on to counsel blue chip companies, top business executives and entrepreneurs both in the United States and worldwide. Torossian has lectured on crisis PR at Harvard Business School, appears regularly on CNN & CNBC, is a contributing columnist for Forbes and the New York Observer, and has authored two editions of his book, "For Immediate Release: Shape Minds, Build Brands, and Deliver Results With Game-Changing Public Relations," which is an industry best-seller. A NYC native, Torossian lives in Manhattan with his children. He is a member of Young Presidents Organization (YPO), and active in numerous charities