(Bloomberg) -- Nikola Corp. filed for bankruptcy, culminating a long decline for the onetime darling of the electric-vehicle industry, which grappled with weak sales and cycled through CEOs in the wake of a fraud scandal.
The company is exploring a sale of its assets after entering Chapter 11 in Delaware on Wednesday. In court documents, it listed total funded debt and lease obligations of $98 million.
The filing caps a struggle by the maker of electric and hydrogen-powered semi trucks to get a handle on dwindling cash, slow sales and a collapsing stock price. Bloomberg reported earlier this month that Nikola was exploring a possible bankruptcy filing as the company acknowledged it was “relentlessly working to raise capital.”
Nikola’s shares plunged 39% as of 4 p.m. Wednesday in New York. The stock had already lost 98% of its value over the past 12 months through Wednesday.
The company has been on a tumultuous journey since it went public in 2020 through a deal with a special purpose acquisition company. The stock surged following the closing of that transaction. Shortly thereafter, Bloomberg News reported that founder Trevor Milton had overstated the capability of Nikola’s debut truck. Those allegations, coupled with a subsequent short-seller campaign targeting the company, led to Milton’s ouster and later conviction on fraud charges.
In a post on LinkedIn, Milton blamed the bankruptcy on an unsuccessful bid to replace Nikola’s board of directors and the company’s current management
“This is what happens when you frame a founder and destroy a brand,” Milton said in the post.
In recent years, the company has endured cash-flow issues, slow demand and executive turnover. Nikola also recalled its battery-electric trucks after battery fires in 2023 prompted it to temporarily halt sales.
Nikola’s market value peaked at $29 billion in the days after it began trading, but it had fallen to less than $100 million before the filing.
Nikola is the latest manufacturer to succumb to a punishing environment for EVs, which are struggling to maintain traction due to high costs, spotty charging infrastructure and lukewarm customer interest. Fisker Inc. filed for Chapter 11 bankruptcy in June, while Canoo Inc. announced a Chapter 7 filing Jan. 17 — both companies, like Nikola, went public via blank-check reverse mergers during a wave of such listings in 2020. Swedish battery maker Northvolt AB filed for bankruptcy protection in the US in November.
With its filing, Nikola is seeking authorization to pursue an auction and sale process, the company said in a statement. The company said it intends to meet obligations to employees, and it has $47 million of cash on hand.
Chief Executive Officer Steve Girsky, a former Morgan Stanley analyst and General Motors Co. executive, had been leading a recent effort to raise money or find strategic alternatives, Bloomberg reported.
Sale Effort
Nikola retained Houlihan Lokey in October as its investment banker to conduct a marketing process for a potential sale, following failed efforts by other bankers it had hired, including Goldman Sachs.
The truckmaker hasn’t selected a stalking horse bidder. As of the petition date, Nikola said it’s in active discussions with at least three parties interested in such opportunity. At the same time, it has pivoted to evaluating the sale of its separate business segments “since a going concern sale may not ultimately prove viable.”
A person familiar with Nikola’s bankruptcy plans confirmed there has been interest from a number of potential suitors in all or some of the company’s assets and intellectual property, including its hydrogen-fueling network, facilities, data and engineers.
The company still has 880 employees, who will remain paid for the next two months, the person confirmed, asking not to be identified discussing a private matter. Nikola has also currently retained all of its executives apart from Chief Commercial Officer, Tom Schmitt, who joined Nikola in August but has since exited the role.
The company has been unable to secure fresh funding in recent months because of legal overhangs from SEC settlements and a class action lawsuit, making it increasingly difficult for Nikola to have a path forward. At the same time, a number of the company’s suppliers have required Nikola to pay daily, the person said.
Nikola’s hydrogen-fuel network will be operated by it through the end of March, but will need one or more partners to operate beyond that date, the company said.
Some potential investors walked away after having conversations. Nikola said the feedback was that the investment required to achieve the business plan was too difficult given the “long and uncertain path” to profitability.
Nikola set a deadline of March 10 to enter into a stalking horse agreement and it aims for a sale hearing in April.
--With assistance from Jeremy Hill, Luca Casiraghi and Anne Cronin.
(Updates with additional details of bankruptcy filing throughout.)
