Shares of electric truck start-up Nikola (NKLA) dropped more than 30% in pre-market trading on Monday following the overnight resignation of executive chairman and founder Trevor R. Milton after coming under fire from a short-seller.
“I asked the Board of Directors to let me step aside from my roles as Executive Chairman and a member of Nikola Board of Directors. The focus should be on the Company and its world-changing mission, not me. I intend to defend myself against false allegations leveled against me by outside detractors,” Milton wrote in a statement posted on his Twitter account at 2:21 a.m. ET on Monday morning.
On Sept. 10, activist short-seller Hindenberg Research issued an extensive report claiming Nikola “is an intricate fraud built on dozens of lies” over the course of Milton’s career. In that report, the short-seller raised 53 questions for the company.
Four days later, Nikola responded to what it called a “false and defamatory” report from an activist-short seller “financially motivated to manipulate the market and profit from a decline” in Nikola’s share price.
The SEC is examining Hindenberg’s claims. Nikola said it contacted the SEC and “intends to fully cooperate” with its inquiry.
The Justice Department is also making an inquiry, according to a Wall Street Journal report.
Shortly after Nikola’s response, Hindenberg Research, which pointed out that the company answered 10 of its 53 questions, characterized the company’s rebuttal as “a tacit admission of securities fraud.”
In response to Milton’s resignation on Monday, Hindenberg Research tweeted: “We think this is just the beginning.”
BREAKING: FreightWaves reporting “Trevor Milton has resigned as Executive Chairman of Nikola Motors (NASDAQ: NKLA) and has departed the company effective immediately.”
— Hindenburg Research (@HindenburgRes) September 21, 2020
In an 8-K filing with the Securities and Exchange Commission on Monday, Nikola said Milton offered to voluntarily step down from his position as executive chairman, board director, and all positions as an employee and officer in the company and its subsidiaries and after deliberation the board accepted.
The company noted that Milton “will be making himself reasonably available to provide consulting services” and to assist Nikola as “reasonably requested” by the board through the end of 2020.
The filing noted that Milton has agreed to relinquish 100% of the 4.859 million performance-based stock units granted on Aug. 21. And the right to enter into a two-year consulting agreement with an annual fee of $10 million.
For three years, Milton agreed to not purchase more than 19 million shares of the company’s outstanding common stock, propose any extraordinary transaction related to the company, solicit any proxy for election or removal of directors to the board, seek representation on the board, or submit a stockholder proposal.
Milton holds 91.64 million shares, or a 24.18% stake in the company, according to Bloomberg data.
Shares of Nikola were last trading down 28.83%, or $9.69, near $24.50 on Monday before the market open.
Julia La Roche is a Correspondent for Yahoo Finance. Follow her on Twitter.