Nikola founder Trevor Milton may sell his 91.6 million shares from Tuesday

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CEO and Founder of US Nikola Trevor Milton attends a dinner party to showcase his new fully electric and hydrogen fuel battery trucks in partnership with CNH Industrial at an event in Turin, Italy on December 2 2019.
Massimo Pinca | Reuters
Trevor Milton, chairman and founder of Nikola, is the company’s largest shareholder with more than a quarter of the startup’s shares, and he can sell them all starting Tuesday.
Milton, who has disappeared from the public eye and removed all social media accounts after resigning amid a haze of controversy in September, is once again gaining the attention of Wall Street. He owns around 91.6 million shares of Nikola – valued at around $ 1.9 billion based on Monday’s closing price – which he can trade for the first time since the company went public. early June.

There are up to 166 million shares, including those in Milton, held by other insiders and early investors that are eligible to trade as of Tuesday. With approximately 360.9 million shares of the company outstanding, Milton is by far the largest single shareholder of Nikola.

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 reduced deal with General Motors on Monday. GM has given up on a stake in the electric truck maker and plans to produce the Badger, an electric pickup that was supposed to be the company’s first foray into the consumer market.

The stock was down a further 5.3% in pre-market trading on Tuesday.

The company promises to make fully electric semi-trucks powered by hydrogen fuel cells that GM has agreed to supply, although Nikola has yet to mass produce.

Much of Milton’s wealth is said to be tied to Nikola’s shares, which have been reduced by 40% since he left the company after charges of fraud and sexual abuse were laid. A spokesperson for Milton declined to say what he plans to do with the shares. The company also declined to comment on the end of the blocking period.

RBC Capital Markets analyst Joseph Spak predicts Milton will sell some of his shares, but not all.

Any sale of these shares could create “considerable additional selling pressure in the very near term,” Deutsche Bank’s Emmanuel Rosner wrote in a note to investors on Monday. Rosner, who maintains his holding rating on the stock, warned investors early Monday that there was “great volatility ahead” for Nikola shareholders.

Several analysts said the reduced deal would likely weigh on Nikola’s shares in the short term but would have little relevance to the company’s long-term plans. JP Morgan analyst Paul Coster even said that a withdrawal from the stock could be “a good buying opportunity”.

The stock is already under pressure after GM scrapped its stake in Nikola, Wedbush analyst Dan Ives said, adding that this adds to “lingering lock-in concerns” for investors. He reiterated an underperformance rating and maintains his price target of $ 15 for Nikola.

“It has gone from a game-changing deal for Nikola to a good sourcing partnership, but nothing fancy and the street will be disappointed as a result with lingering concerns of blocking,” Ives said.

A total of about 161 million common shares will become eligible for sale starting Tuesday, according to Nikola’s third-quarter filing with the SEC. An additional 5 million shares may also become eligible for sale depending on the price of the company’s shares. Milton’s ownership includes 6 million shares in “founder’s options” that he could give to early employees.

More Nikola shares were expected to be eligible for trading on Tuesday, but investors who hold 136.5 million shares have agreed to extend their lock-up until April 30. This includes 39.8 million shares held by a company controlled by Nikola CEO Mark Russell but co-owned with Milton, Russell told CNBC last week.

Milton resigned after the Justice Department and the Securities and Exchange Commission began investigating allegations of fraud raised by short seller Hindenburg Research in September.

Hindenburg accused Milton of making false claims about Nikola’s technology in order to grow the business and partner with automakers. The report, titled “Nikola: How to ward off an ocean of lies in a partnership with America’s largest automaker,” was released two days after the company announced its initial $ 2 billion deal with GM which soared the shares of both companies. He called Nikola a “complex fraud based on dozens of lies” by Milton, who denied several of the allegations.

In addition to federal investigations, two women have since filed sexual abuse complaints with authorities in Utah against Milton. Both allegations dated back over 15 years but separately involved Milton’s cousin and an office assistant. Both incidents reportedly occurred when the women were 15 years old.

Through a spokesperson, Milton “strongly denied” the accusations of the women.

– CNBC Michael Bloom contributed to this report.

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