One day after his abrupt resignation from Nikola Corp., former Chairman and CEO Trevor Milton ghosted his Twitter followers and vanished from public view.
Why he did it is a bit of a mystery. But his disappearing act, to some, points to guilt or cowardice in the fallout from a report that accused the company he founded of “intricate fraud.”
Now Wall Street whiz and former General Motors exec Steve Girsky is at the helm as chairman of Nikola. His job is to clean up the mess and ensure that a lucrative 10-year deal with GM moves forward.
“This is a dangerous moment for Nikola and for Girsky,” said Eric Schiffer, CEO of The Patriarch Organization and Reputation Management Consultants. “The Nikola image is headed for the electric graveyard and its new chairman must reinforce confidence and prove to the public, and GM, that the company was not some giant fleece job and investors were not the suckers who bought the fake watch on the streetcorner.”
On Monday, Nikola announced Milton had quit. The news came after a Sept. 10 report by Hindenburg Research that accused Nikola of being an “intricate fraud.” Bloomberg has reported that when Nikola showed its Nikola One semi-truck in 2016, Nikola falsely said that it was a working prototype even though it was non-running and missing essential parts.
Nikola has disputed the claim of fraud. But federal authorities are examining the allegations and Nikola’s stock price has taken multiple beatings. On Wednesday, the stock price closed at $21.15. That’s down from $37.57 on Sept. 10.
The bad publicity has cast a dark cloud over Nikola’s pending deal with GM. In that deal, GM will build the all-electric Nikola Badger pickup, due to market at the end of 2022, in exchange for $2 billion in stock and other cost benefits.
In a subtle move Tuesday, Milton deleted his Twitter account. The @nikolatrevor merely reads, “This account doesn’t exist.” And, just like that, he was gone.
A spokeswoman for Nikola confirmed Milton deleted his Twitter account, but she did not know why. She no longer represents him as he’s hired the prestigious Sard Verbinnen & Co. in New York.
Robert Rendine, Milton’s new rep, declined comment.
‘Can’t take the heat’
Milton is a billionaire who can afford a fancy public relations firm. While he agreed to hand over about $166 million of equity and a two-year, $20-million consulting contract as part of his resignation, he keeps $3.1 billion in stock, according to a U.S. Securities and Exchange filing.
He may also need that PR firm in light of the recent bad publicity, a federal investigation and his sudden vanishing, industry observers said.
It is likely Milton was attracting ongoing negative commentary to his Twitter account, even if he wasn’t posting or otherwise interacting with users, and that is why he got off it, said Karl Brauer, executive analyst at iSeeCars.com and Forbes Autos Contributor.
“Removing his account keeps people from posting about Nikola and tagging him in the post,” Brauer said. “He also might have had past posts he doesn’t want people to see. Of course, with an SEC investigation in progress, that may or may not cause more problems.”
There were indeed some snarky comments posted to Milton’s Twitter feed. One post asked him, “Are you going to plead insanity like Elizabeth Holmes?”
That’s in reference to a report that Holmes, the disgraced founder of fake blood-testing company Theranos, might argue that she was suffering from a “mental disease” when she allegedly defrauded investors out of hundreds of millions of dollars.
Whatever the reason, Milton’s departure from Twitter further damages his and the company’s reputation, Schiffer said.
“The message says he can’t take the heat and may actually be guilty,” Schiffer said. “Contrast his actions with his Sept. 10 tweet that ‘cowards run.’ Many people may now see him as a coward, a hypocrite and a confirmation that they may have been conned, the opposite of what he wants to message.”
A more measured tone
While the “optics of the resignation are terrible,” the outcome is in the best interest of Nikola, wrote Jeffrey Osborne in a research note for Cowen.
“As the company’s missteps in their first earnings call showed and Mr. Milton’s vocal use of Twitter and Instagram to battle his critics have shown, there were some elements of being a public company that in our view the company and some members of management were not prepared for,” Osborne said.
He said that with Girsky chairing the board and Mark Russell as Nikola’s CEO and Kim Brady as its CFO, the communications and “narrative from management will set a more measured and less promotional tone with investors.”
That will be critical, said Schiffer, because, “Without the right communication strategy investors will bolt and Nikola’s stock could collapse faster than the speed of light.”
So now it is on Girsky, who helped put together the deal with GM, to repair the damage to Nikola, and fast.
“Girsky needs to establish at least one, and preferably multiple, verified accomplishments for Nikola as soon as possible,” Brauer said. “Until he does, the company’s value and capabilities will be in question. This skepticism now goes beyond Nikola, impacting GM’s reputation as well.”
Girsky’s media team is not making him available for interviews.
The deal is set to close in less than a week and GM is not backing off of it. CEO Mary Barra has told Wall Street GM did its thorough due diligence and will proceed.
“Our company has worked with a lot of different partners and we’re a very capable team that has done the appropriate diligence,” Barra said. “(The deal) validates our technology, it allows us to have more people using the technology, which gives us the advantage of scale, which will help us drive costs down.”
Girsky’s investment firm VectoIQ has injected Nikola with $700 million and oversaw its public listing. He has said he vetted Nikola thoroughly before presenting a deal to GM and “I did put my reputation on the line for this deal.”
Girsky, who was at GM from 2009 to 2014, served in many roles there that give him the solid understanding of GM’s global strategy, how it works with partners and how it develops technology, said Martin French, managing director of USA for Berylls Strategy Advisors.
“So he’s now in a really good position to formulate what Nikola needs to do,” French said.
Given Milton’s resignation and the federal investigations into Nikola, Girsky’s first job is to “stay in the game and be transparent with the investors and keep engaging with GM with the plan. He is the right guy to do what he needs to do and settle things down and move forward.”
The deal with GM is a smart one for both sides and the noise around Nikola may just be a “bump in the road,” French said.
“The full extent of what that bump is with Nikola is yet to be seen, whether it did defraud investors or not — but Steve is putting his reputation on the line that he did do the due diligence,” French said. “And, GM’s way of partnering, without investing a lot of money, but rather using its resources, is a very shrewd move.”