Nikola, an electric vehicle company, has hit a major roadblock. They've filed for Chapter 11 bankruptcy protection. This comes after months of warnings that they were running low on cash. It's a far cry from their heyday, when they were a Wall Street darling. Back in 2020, Nikola was valued at around $30 billion, even more than Ford Motor Co. at the time. But things took a turn for the worse when their founder, Trevor Milton, was convicted in 2022 for misleading investors.

        The scandal involved a company video that showed a prototype truck. Prosecutors revealed that the truck wasn't actually driving down a desert highway. Instead, it was a nonfunctioning vehicle that had been rolled down a hill. Milton was sentenced to four years in prison for his role in the fraud.

        Nikola's struggles didn't stop there. They've had a tough time scaling their business, which mostly focuses on electric trucks. In the third quarter, they produced 83 trucks but still recorded a net loss of almost $200 million. In the second quarter, they produced 77 trucks with a net loss of nearly $134 million. The company is now seeking approval to pursue an auction and sale of the business. They have about $47 million in cash on hand.

        Nikola Corp. plans 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. The CEO, Steve Girsky, said the company has faced various market and macroeconomic factors that have impacted their ability to operate. The Board has determined that Chapter 11 represents the best possible path forward under the circumstances.

        Milton was convicted of fraud charges, portrayed by prosecutors as a con man six years after he had founded the company in a basement in Utah. Prosecutors said Milton falsely claimed to have built its own revolutionary truck that was actually a General Motors product with Nikola’s logo stamped onto it. 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. Aside from its personal troubles, Nikola has also had to contend with a more perilous environment for EV makers as sales slow. President Donald Trump has promised to eliminate what he incorrectly calls President Joe Biden’s “electric vehicle mandate. ” What that means in practice is that his executive order will revoke a non-binding goal set by Biden to have EVs make up half of new cars sold by 2030. He will also likely seek repeal of a $7, 500 tax credit for new EV purchases approved by Congress as part of Biden’s landmark 2022 climate law, the Inflation Reduction Act.

        Nikola, based in Phoenix, Arizona, saw its shares fall below $2 late last year and tumbled another 40% Wednesday. The company's journey from a promising start-up to bankruptcy highlights the challenges and risks in the electric vehicle industry. It serves as a cautionary tale for investors and entrepreneurs alike. The electric vehicle industry is competitive and unpredictable, and companies must navigate not only technological challenges but also regulatory and market uncertainties. Nikola's story underscores the importance of transparency, ethical business practices, and adaptability in the face of changing market conditions.

Nikola's Bumpy Road to Bankruptcy

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