Misleading Claims and PR Crises
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.