Troubled electric vehicle maker Nikola has filed for Chapter 11 bankruptcy protection months after saying that it would likely run out of cash early this year.
The company, once a rising star on Wall Street, became enmeshed in scandal and its founder was convicted in 2022 for misleading investors about the company’s technology.
At the trial founder Trevor Milton, prosecutors say a company video put of a prototype truck appearing to be driven down a desert highway had actually a rolled down as it was nonfunctioninal.
The Arizona company filed for protection in the United States Bankruptcy Court for the District of Delaware and said Wednesday that it has also filed a motion seeking approval to pursue an auction and sale of the business.
Nikola has about $47 million in cash on hand.
Nikola Corp. plans to to continue limited service and support operations for vehicles on the road, including fueling operations through the end of March, subject to court approval. The company said that it will need to raise more funding to support those types of activities after that time.
“Like other companies in the electric vehicle industry, we have faced various market and macroeconomic factors that have impacted our ability to operate,” CEO Steve Girsky said in a statement.
The executive said the company has made efforts in recent months to raise funds and reduce liabilities and preserve cash, but that it hasn’t been enough.
“The Board has determined that Chapter 11 represents the best possible path forward under the circumstances for the Company and its stakeholders,” he explained.
In December 2023 founder Trevor Milton was sentenced to four years in prison after being convicted of exaggerating claims about his company’s production of zero-emission 18-wheel trucks, leading to sizeable losses for investors.
Milton was convicted of fraud charges after prosecutors portrayed him as a con man after starting his company in a Utah basement six years earlier.
Prosecutors said Milton falsely claimed to have built its own revolutionary truck that was actually a General Motors Corp. product with Nikola’s logo stamped onto it. There also was evidence that the company produced videos of its trucks that were doctored to hide their flaws.
Called as a government witness, Nikola’s CEO testified that Milton “was prone to exaggeration” in pitching his venture to investors.
Milton resigned in 2020 amid reports of fraud that sent Nikola’s stock prices into a tailspin. Investors suffered heavy losses as reports questioned Milton’s claims that the company had already produced zero-emission 18-wheel trucks.
The company paid $125 million in 2021 to settle a civil case against it by the SEC. Nikola didn’t admit any wrongdoing.
Shares tumbled more than 47% before the market opened Wednesday.
