After months of waiting, the time of reckoning has come for electric truck maker Nikola (NASDAQ:NKLA). NKLA stock is up 1.1% today after the EV company agreed to pay $125 million to the U.S. Securities and Exchange Commission (SEC).
Nikola has long been weighed down by fraud accusations connected to former CEO and founder Trevor Milton. As such, the settlement comes with almost a sigh of relief from the company. It signals the end of a dark chapter in Nikola’s history.
Milton came under fire for misleading investors by falsifying claims related to the status of the company’s EV production. The most viral example of this is a video of a Nikola truck appearing to drive down a road. In reality, the truck was simply rolling down an incline, unpowered. Nikola’s June market debut earned it nearly $700 million in funding. According to regulators, this funding came largely under false pretenses.
While no one likes paying hundreds of millions in fines, it may have its silver lining. What else do you need to know about Nikola’s latest name-clearing efforts?
What Does This Mean for the NKLA Stock Outlook?
The SEC has long been a thorn in Nikola’s side. The chance to pay off its debt and clear its name could be the company’s saving grace.
Nikola is one of at least four special purpose acquisition company (SPAC) mergers in the EV space that the SEC is investigating. SPAC mergers have grown tremendously in popularity, with many companies opting for the IPO alternatives. Why? Companies view SPACs as a quicker way to come public. Plus, these mergers have enabled earlier stage companies access to funding. Regulators, on the other hand, find this notion worrisome.
Investors likely know that SPACs exist solely to acquire and take a private company public. This gives early investors in the SPAC stock a chance to ride merger excitement high. But, this structure comes with a few catches. If a SPAC doesn’t make an acquisition within a set timeframe, early investors get their cash back. According to regulators, this puts pressure on shareholders to approve unsound deals. This is basically the story the SEC is telling about Milton and Nikola.
But with this latest settlement, it seems Nikola is putting the past behind it. Nikola has even stated plans to seek compensation from Milton for the charges. Could this be the beginning of a new arc in Nikola’s quickly evolving story?
On the date of publication, Shrey Dua did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
