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0:16

A little more than two years ago, the Feet's

0:18

Claire Bushy hopped onto a conference

0:21

call to hear about a new deal that General

0:23

Motors was announcing. the

0:25

day that the

0:28

GM deal was announced,

0:31

I was on the call with bunch of other

0:33

reporters And I

0:38

was nervous and intimidated

0:40

because I'd only

0:42

been writing about automotive for, like,

0:44

nine months at that point. And

0:47

so you know, I'm

0:49

listening to them describe this

0:51

deal and I'm just thinking like

0:53

everyone must know something about this that I

0:55

don't understand. Now,

0:58

in this deal, General Motors plan

1:00

to take a two billion dollar equity

1:02

stake in this fuzzy new company

1:04

called Nikolay. Just

1:07

a few months earlier, Nikola had gone

1:09

public with ambitious plans to

1:11

transform the trucking industry. by

1:13

manufacturing electric and hydrogen

1:16

powered trucks. And

1:18

in exchange for the equity stake,

1:20

the plan was for GM to engineer and

1:22

manufacture capture an electric pickup

1:24

truck for Nicola, while allowing

1:26

the startup to access GM approved

1:29

parts. They were

1:31

they were taking equity in Nicola

1:33

sort of as payment

1:36

for producing Nicola's

1:39

badger, which was going to be a pickup truck,

1:41

an electric pickup truck. But

1:43

just seemed really strange to me

1:46

that you know, if like Nikola

1:49

is this hot new company and

1:52

they supposedly

1:54

have cutting

1:56

edge, fuel cell, electric

1:59

vehicle technology, like, why

2:02

is GM going to be the company

2:04

make making it because

2:07

why would the company that supposedly

2:10

has this revolutionary intellectual property

2:12

not be the company that is making the

2:14

product. And

2:16

so on that conference call,

2:18

there's the CEO of GM, Mary

2:20

Bara, and this guy named

2:22

Trevor Milton who's the founder

2:24

and at the time the executive chairman

2:26

of Nikola. And

2:28

so on these kinds of calls, the press gets to

2:30

ask questions. And when

2:33

it becomes Claire's turn,

2:35

she has hers ready. I

2:38

tried to, like, ask thing like, can

2:39

you explain this further to me?

2:42

So what happened when you asked that?

2:44

Trevor talked a lot. Like, word

2:46

salad, you know? And again, I was

2:49

listening like, as a reporter, sometimes you're

2:51

just, like, constantly trying to, like,

2:53

make sense of something. And sometimes

2:55

that's because you just don't understand

2:57

it and you you need to be able to

2:59

absorb something new. But in some cases,

3:01

it's because it doesn't make any sense.

3:04

And in that moment,

3:05

I

3:06

thought I was in the first kind of interaction

3:09

and I was definitely

3:09

in the second.

3:12

As the company's founder, Trevor Milton

3:14

was the face of Nicola. He

3:16

was the one leading these product reveals.

3:18

Oh, we've been waiting so long

3:20

to show this to the world. We have no idea. It's his

3:22

side.

3:24

It's hard to even contain

3:26

my about this.

3:27

And telling the world about his

3:30

David versus Goliath vision of

3:32

his company,

3:32

imagine going up against

3:34

the biggest companies in the world

3:36

wasn't against a neighborhood company

3:39

or even a big company. We go up against the

3:41

biggest In the world, people

3:43

forty, fifty billion dollar market caps.

3:47

This

3:47

is what we've been able to show the world we can

3:49

do. But

3:50

that weird feeling that Claire had

3:53

within days of that phone

3:55

call, something would come out that

3:57

would totally changed the course of this

3:59

company, Nikola, and

4:01

the life of its founder, Trevor

4:02

Milton. And

4:04

ultimately, two years later,

4:07

it led to Milton finding himself

4:09

in a New York City courtroom, facing

4:12

charges of fraud.

4:30

I'm Mikaela Tandera from The Financial

4:32

Times. On this

4:34

week's episode of Behind the Money,

4:36

we're digging into the trial of Trevor

4:38

Milton,

4:38

the founder of electric truck

4:41

startup Nikola. And

4:43

what this trial says about founder

4:45

and investor culture

4:51

today.

4:56

Claire, thank you so much for coming on

4:58

behind the money. It's great to have you here.

5:00

Thank

5:00

you very much. So

5:02

Claire, let's start with the basics

5:04

here.

5:05

Who is Trevor Milton?

5:07

Trevor Milton,

5:08

he's forty right now. He

5:10

spent most of his childhood in

5:13

Utah. and he did an interview

5:15

with a trade publication a few years ago.

5:18

And he said that his

5:20

father was a manager on

5:22

the railroad and that his mother died

5:24

of cancer when he was a teenager.

5:26

He

5:27

he dropped

5:28

the college, sort

5:31

of had, like, a few business ventures

5:33

that didn't go anywhere when

5:35

he was a younger man. And then

5:37

he kind of stumbled

5:39

upon this idea

5:41

of retrofitting

5:44

diesel trucks. so that they could also,

5:46

like, partially run on natural

5:48

gas, to a cleaner form of energy.

5:51

So he gets

5:53

involved with this

5:55

venture in two thousand

5:57

nine. This is in Utah, and

5:59

in order to run this business.

6:02

He raises a lot of money from

6:04

acquaintances, from people he knows

6:06

in the Mormon church, And

6:09

he gets some midsized companies that

6:11

want to buy this diesel

6:13

hybrid system from

6:16

him. But not only

6:18

after, his company gets hit with a couple

6:20

of lawsuits. Both

6:22

are from groups essentially saying

6:24

that the company wasn't doing what it said it

6:26

could too. Both lawsuits are dismissed

6:29

and Trevor moves on to something new,

6:32

Nicola.

6:32

So Claire,

6:35

what was Nicola

6:36

trying to do? Nicola

6:38

is supposed

6:40

to be a

6:42

hydrogen

6:43

electric trucking

6:46

company. So we're still on this

6:48

idea of changing the trucking

6:50

industry so that it

6:52

has greener emissions

6:55

or in the case of hydrogen electric

6:57

having zero emissions. You

7:00

know, that's the dream.

7:02

And the idea is

7:04

that customers

7:06

will buy the truck

7:08

from Nikola for about three hundred thousand

7:10

dollars, and then they will

7:12

also buy the hydrogen from

7:15

a system of stations

7:17

across the country, and that

7:19

Nikola will also get four hundred

7:21

thousand dollars over the life

7:23

of each truck. So, you know,

7:25

seven hundred thousand dollars for each

7:27

truck sold. And then

7:30

You know, like, it's

7:32

a good idea. It's just one of those things

7:34

that's incredibly hard to do in the execution.

7:38

So Anyway,

7:39

jumping forward a few years.

7:41

And in twenty twenty, Nikola goes

7:43

public, but they don't

7:45

go through the usual initial public offering

7:47

process. Instead, they

7:49

take this very, you know, in a twenty twenty

7:51

sort of way, trendy path.

7:53

And that is that they go public

7:55

with a spat or special

7:58

purpose acquisition company.

7:59

Now we did a whole episode

8:02

about specs a couple months ago and a lot

8:04

of the issues surrounding them. So,

8:07

Claire, could you just briefly explain

8:09

what's unique about a spec

8:11

compared to an IPO?

8:13

So an initial public offering,

8:15

basically, private companies sell

8:17

shares through an investment bank to

8:19

institutional investors. and

8:22

a spec basically you

8:24

have like a shell company that already

8:26

goes public and then they

8:28

find a private company to merge with.

8:30

And the main difference is that an IPO

8:33

involves more scrutiny.

8:34

Right. SPAC

8:36

equals less scrutiny.

8:38

Okay.

8:39

So then Nicola goes public

8:41

and what

8:42

happens next?

8:43

So the stock does

8:46

really well. Charter Milton is out on

8:48

Twitter and he is

8:50

promoting the stock. It

8:52

is perceived as you

8:54

know, possibly Tesla arrival

8:57

in some ways. In fact, you know,

8:59

the name of the company, it's

9:01

modeled after Inventor, Nikolai

9:04

Tesla. So it

9:06

plays on that. And

9:08

the price of the stock

9:10

keeps rising. And at

9:12

one point, very briefly, it

9:14

had a higher market capitalization

9:16

than Ford without ever

9:18

making a product. Okay.

9:20

So, you know, without putting a product in the

9:22

market, the company has a pretty great

9:24

summer than all things considered. And,

9:26

you know, then just after Labor Day on

9:29

September eighth, Claire, you go on this

9:31

conference call to hear about this big new GM

9:33

deal and you report on that.

9:35

So what happens next?

9:38

Two days later, after

9:40

GM announces their plans to take an

9:42

equity stake, a short seller named

9:44

Hindenburg Research puts out

9:45

this report. You

9:48

know, they actually took their name

9:50

after the blimp filled with hydrogen that

9:52

famously exploded. Wow.

9:55

Okay. And

9:57

just to remind listeners, a short seller

9:59

is someone who believes that the price of a stock

10:01

is gonna go down and they essentially

10:03

place a financial bet that the stock

10:05

will drop. So

10:08

what does this Hindenburg research have

10:10

to say?

10:11

basically, what they say

10:13

is Trevor Milton has

10:15

a shady business history

10:18

that Nicola does

10:20

not have its own special

10:22

automotive technology. They're

10:24

just relying on suppliers

10:27

and saying it is

10:29

their own. And and

10:32

infamously, Hinnigberg

10:34

Research introduces the world

10:37

to the Nicola in motion video.

10:40

That's

10:40

right. And so this video

10:42

that we're talking about, it's still

10:44

lives on on the Internet. And

10:47

I'm actually gonna pull it up and

10:49

play it here. So

10:51

could you just describe what we're

10:54

actually looking

10:54

at?

10:58

So you're looking out at this

11:00

sort of

11:01

vast American landscape

11:03

of sort of, you know,

11:06

birch grass, desert

11:08

lake, scrubby little

11:10

plants and you're seeing this

11:13

long strip of concrete and

11:15

there is this truck that

11:17

is moving. It has

11:19

kind of a sort

11:21

of a sleek on those sheared off

11:24

face and it's a it's a semi,

11:26

you know, it's an eighteen wheeler,

11:28

a It's

11:29

a it's a really big truck and there's kinda

11:31

just, like, charged music

11:32

playing. And you you

11:35

you see this truck, like, rolling

11:37

across the landscape. And,

11:39

you know, it all seems like very

11:42

exciting.

11:43

And the thing is,

11:46

The lens looks flat.

11:49

And I spoke with someone

11:51

shortly after the

11:53

short sellers report came

11:55

out. I spoke with someone

11:57

who

11:57

was able

12:00

to talk about where that

12:02

was filmed. because they

12:04

had gone and visited the site. And

12:08

that land

12:09

is not flat. It

12:10

is very much on a grade. And

12:13

so, yeah, the truck

12:16

was

12:16

rolling downhill. Yeah.

12:17

Because part of your job

12:20

for a recording on this was you were trying to

12:22

verify these claims from the

12:24

Hindenburg research report where they were

12:26

saying, hey, no, actually, this is

12:28

rolling downhill. So you needed to

12:30

go and smooth that

12:30

out and actually see if you could

12:33

confirm. Yes. Yes. Exactly.

12:35

Okay. And so to recap, this

12:38

Hindenburg short seller report comes out

12:40

on September ten, just

12:42

two days after that big

12:43

GM deal was announced.

12:45

What happened after

12:47

that?

12:48

So the stock drops immediately. It was at,

12:50

like, fifty dollars and five cents on

12:52

September eighth, and then it drops

12:54

down to thirty seven fifty

12:56

seven by the close of business

12:58

on the tenth. And Trevor

13:01

Milton and Nicola just go into, like,

13:03

massive damage control. And

13:07

Milton is a really big

13:09

fan of Twitter. Kind of like this

13:12

Elon Musk model. and

13:14

he tweets that this report is

13:16

a quote, hit job because

13:18

Hindenburg as a short seller is going

13:20

to

13:20

make money if the stock price drops.

13:23

So the company is trying to do

13:25

damage control, but there's an awful lot

13:27

of damage contained because this

13:29

report comes out on September tenth

13:31

and five days later, We

13:33

at the FTC had a scoop

13:35

and we reported that the Department of Justice

13:37

was investigating them. So

13:40

lots of damage. So

13:42

within days of all that, Trevor Middleton

13:45

stepped down from his role as executive

13:47

chairman at Nicola. And

13:49

in July twenty twenty one, the

13:51

US attorney for the southern District of New

13:53

York charged Trevor with two counts of

13:55

securities fraud, one count

13:56

of wire fraud,

13:58

and about a year later added a

14:00

second count of wire fraud.

14:02

So clear, what

14:04

did Trevor do? How did he respond to all

14:06

of this?

14:07

Terrableton's public relations teams

14:09

puts out a statement saying that

14:11

he is innocent and

14:13

that the mirror

14:16

charging of him is an example of

14:18

trying to criminalize entrepreneurship.

14:21

you know, he's he's arrested. He

14:24

posts a hundred million dollar bond. And

14:27

meanwhile, Nikola is continuing

14:29

to pay his legal bills because

14:31

that was actually part of his

14:33

separation agreement with the company. And

14:35

then finally, in September of this year,

14:37

so just a few weeks ago, Trevor

14:39

Milton's fraud trial begins.

14:42

So Claire, how's it all been going?

14:44

So

14:45

basically, the trial has

14:47

been three weeks of prosecutors

14:50

presenting their case, and Milton's

14:53

defense presented for

14:55

about a day.

14:56

Okay. And and what's the main

14:59

crux of the prosecutor's argument

15:01

then? The main thing that

15:03

prosecutors are arguing is that he

15:06

drove up the share price to enrich himself

15:08

by making false and

15:10

misleading statements, and

15:12

that that is fraud. And

15:15

it's from making, like,

15:17

hyped up claims about the

15:19

technology saying that they

15:21

were able to produce hydrogen

15:24

at a rate, like, a quarter of

15:26

the cost of what it actually cost to

15:28

produce it. that he specifically

15:30

targeted small retail investors.

15:32

And

15:33

what's the defense saying? That

15:35

he

15:35

was following the company's marketing plan

15:37

and he didn't say anything he didn't

15:39

think was true. That's

15:40

because with fraud, you have

15:43

to show that they knew

15:45

what they were saying was wrong.

15:47

and

15:47

they still said it anyway.

15:49

But

15:49

at the moment, we're in a bit of a holding

15:52

pattern with the trial. Before I

15:54

could conclude last week, The court

15:56

adjourned and is scheduled to resume

15:58

again later this week.

16:00

But now clear, what's been

16:02

happening at Nicola during all this?

16:04

I mean, Some people might wonder, you know,

16:06

hearing everything. Does this company

16:08

still even exist?

16:10

Well, they have had to recall

16:12

the ninety three trucks that they so far have

16:15

produced, and there was

16:17

a issue with the seatbelts. And

16:19

so had

16:20

to recall them. Turns

16:21

out manufacturing trucks is

16:23

hard. Mhmm. Well, you

16:25

know, this story about Trevor Milton

16:27

and Nicola

16:28

You can certainly see some

16:30

parallels between this and the events

16:32

that unfolded with Elizabeth Holmes

16:34

and Theranos. with

16:36

Marcus Braun and Wirecard.

16:38

This isn't exactly a new story.

16:41

You know, a charismatic or interesting

16:43

or quote unquote brilliant founder who's

16:45

accused of misleading investors.

16:48

I'm wondering if you can

16:50

see a common thread between

16:51

these stories. I think

16:53

it speaks a little bit to

16:55

the herd mentality of investment, the

16:57

assumption that other people have done their homework

16:59

even if you haven't done yours. and

17:01

that if smart people are investing, then

17:03

surely it must be a

17:05

smart investment. And

17:08

I think that can get out of hand

17:10

really quickly. And there's

17:12

also like a fear of missing out. Do

17:14

you

17:14

think there's any evidence that

17:17

investors are getting better about not buying into,

17:19

like, this founder, evangelist

17:22

type thing. I think

17:23

that's a

17:24

deeply human thing and I

17:26

don't think it's ever going to go away.

17:28

I mean, at the end of the day,

17:30

a couple things are true.

17:33

People tend

17:35

to trust others and

17:37

they tend

17:38

not to do their homework.

17:40

Yeah. Totally. I mean,

17:42

it's been a really big thing in

17:45

the last several years,

17:47

probably just because there's been so much

17:49

easy money sloshing around. But

17:52

there's always been people selling things that

17:55

aren't what they say they are. You can find

17:57

that in history books. one

17:59

of

17:59

my favorite stories that I covered as a

18:02

young reporter in a small

18:04

town in Ohio

18:06

was a gentleman

18:09

who came to town and promised

18:11

that he was going to build a new stadium

18:13

for the local high school. And

18:15

it never happened. and he

18:18

skipped down. And,

18:21

you know, and there

18:22

were a lot of really angry

18:25

hurt people who were

18:27

kinda behind after that. And

18:29

I remember one of them told me

18:31

he would give you the shirt off his

18:33

back. It just probably hadn't been

18:35

paid for. And

18:38

everyone really liked this

18:40

guy for, you know, until, like, they

18:42

and until they just couldn't see

18:46

it. You know, they couldn't avoid it

18:49

anymore. That, like, they really had been

18:51

done wrong. But like he was so

18:55

Jovio,

18:55

well, legs, good company, enjoyable

18:57

to be around and

19:00

a good talker

19:02

You know?

19:03

Well,

19:04

Claire, thank you for taking the

19:06

time to come on the show. We'll

19:09

definitely be keeping our eyes peeled for

19:11

what happened with Trevor Milton's

19:13

trial. Thank you very much.

19:19

Behind

19:32

the

19:35

money is hosted by me,

19:38

Mikala Tinderra.

19:38

This episode was edited by John

19:41

Buckley. Topher Foreheads is our

19:43

executive

19:43

producer. Sound design

19:45

and mixing by Sam Givengo.

19:48

special

19:48

thanks to Jessica Die. Cheryl Bromley

19:50

is the global head of audio.

19:52

Thanks for listening.

19:54

See you next week.