Hydrogen truck company, Nikola, announced yesterday that its founder Trevor Milton has resigned as Executive Chairman.
The news follows allegations of fraud at the company after Hidenburg Research accused the startup of intricate fraud.
The Department of Justice and the Securities and Exchange Commission is reportedly making inquiries into the accusations which have been vehemently denied by Nikola.
Milton will be replaced in his role by Stephen Girsky, a Nikola board member and former vice-chairman of General Motors.
Earlier in the month General Motors signed an agreement worth $US2 billion, to produce the hydrogen fuel cell electric pickup truck for the company.
It is estimated the 112 year old Detroit-based company would cut $US5 billion in manufacturing and engineering expenses.
News of Milton’s departure plummeted shares of Nikola a further 22 per cent in pre-market trading overnight.
In June, Girsky’s firm, VectoIQ, purchased Nikola in a reverse merger that took the startup public.
Girsky has since defended the due diligence that went into the deal.
Where Nikola is concerned, partnerships to develop fuel cell technology and electric linehaul commercial vehicles with Bosch and IVECO and the new alliance with General Motors will be crucial to regaining momentum lost amid these latest allegations.
There are growing concerns that IPO’d electric vehicle companies, continue to launch products with little real world application, to insulate stock by taking credit for batteries they do not yet produce themselves.
Tesla, for its own part, relies on Panasonic to develop its batteries.
Nikola has, in many ways, imitated Tesla’s evolution as a company.
But for investors, a credibility crunch looms.
As the pioneering high profile EV startup, Tesla is going to require enormous sales volumes in a slow market that is set to be inundated by competitors.
So for the moment, the Tesla story might be considered more compelling than the product.
Back in June Tesla was included for the first time in an annual JD Power survey.
The results were damning.
From 223 questions across nine categories the electric vehicle manufacturer ranked as having 250 problems per 100 cars.
Last year Nikola claimed it had secured the IP on a new battery cell technology with double the energy density it had developed in conjunction with a university lab. With public demonstrations originally delayed until the second half of 2020 the announcement garnered scepticism.
At the time Cairn Energy Research Advisors, a firm that specialises in energy storage technology, dismissed the claims as ridiculous.
“Why would they claim this without waiting until they could publicly reveal what the chemistry is and the university laboratory they are working with? It’s very fishy,” Managing Director Sam Jaffe told Forbes.
Milton, upon his resignation, released a statement.
“Nikola is truly in my blood and always will be, and the focus should be on the company and its world-changing mission, not me,” he said.
“So I made the difficult decision to approach the Board and volunteer to step aside as Executive Chairman.”