US Nikola CEO and Founder Trevor Milton speaks during the presentation of his new all-electric battery and hydrogen fuel cell trucks in partnership with CNH Industrial, at an event in Turin, Italy, on December 2, 2019.
Massimo Pinca | Reuters
Electric truck start-up Nikola has still not cleared the shareholder hurdle to raise new funds, the company said on Thursday – hampered by objections from its disgraced and now deceased founder.
The long-struggling company is seeking to raise funds by issuing new shares, a process that requires shareholder approval. Nikola’s annual shareholder meeting on June 1 was abruptly adjourned after its founder and former CEO and chairman, Trevor Milton, voted against the proposal.
The company briefly resumed the meeting on Thursday, when Nikola Chairman Stephen Girsky told shareholders that although voting is now closed, the proposal has not yet passed. Girsky postponed the meeting to July 18 to give shareholders more time to vote.
Girsky said about 48% of Nikola’s outstanding shares voted in favor of the proposal allowing the company to increase its total number of shares outstanding. The proposal requires 50% to pass.
“Shareholders voted overwhelmingly in favor of Proposition 2, with the exception of a single shareholder who appears to represent over 85% of the vote against Proposition 2,” Girsky said.
According to Girsky, holders of more than 112 million, or about 25%, of Nikola’s outstanding shares have yet to vote. He did not name the sole shareholder voting overwhelmingly against the proposal, but Milton is the sole shareholder who controls that many shares.
The company has spent the past month rallying shareholders to vote in favor of the proposal in sufficient numbers to overcome Milton’s “no”. Those efforts will continue until Nikola’s resumed annual meeting on July 18, when the final vote count — or possibly another adjournment — will be announced.
Milton remains Nikola’s largest shareholder. He owns 11% of the company’s stock and controls about 9% more through an investment vehicle he co-owns, giving him effective control of about 90 million shares in total. Votes representing approximately 95 million shares were cast against the proposed June 1 share increase.
Nikola stock was up about 3% in midday trading.
The company does not have an urgent need for cash, but the flexibility to sell more shares is important for its future. Nikola raised $200 million through a convertible note issuance in May, and it had $385 million in cash and an additional $409 million available through a capital line from Tumim Stone Capital as of March 31, for a total approximately $1 billion.
Chief Financial Officer Kim Brady said in May that with the sale of the convertible notes, Nikola had enough cash to fund operations for at least a year without further increases. But the company is burning about $180 million per quarter and an equity offering has been incorporated into its year-end plans, Brady said at the time.
Milton, who founded the electric heavy-duty truck company in 2015, left Nikola in September 2020 after short seller Hindenburg Research accused him of misrepresenting the company’s technology to investors. A federal grand jury indicted him on three counts of fraud in 2021, and a fourth count was added last week. His trial is due to begin in July.
Federal prosecutors alleged that Milton hatched an elaborate scheme intended to increase Nikola’s stock for his own gain, by lying about the company’s technology, the development status of its products and its likely future sales prospects.