Pomerantz Overcomes Motion to Dismiss in Shareholder Suit Against Nikola
In a major victory for Pomerantz and shareholders alike, earlier this month the Honorable Steven P. Logan, U.S. District Judge for the District of Arizona, denied in large part the defendants’ motion to dismiss in a securities class action against the electric vehicle manufacturer Nikola. The case alleges that the company misled investors about key aspects of its business operations, leading to a nearly 76% drop in share price when the truth was revealed.
Nikola had long been considered a leader in electric vehicle manufacturing, working to produce a fleet of trucks that run on hydrogen fuel cells, which are more environmentally friendly than traditional fossil fuels. The company’s signature product was the Nikola One truck, which was unveiled to great fanfare at the end of 2016. A year later, the company released a video showing the truck driving through the desert. In reality, the truck at the unveiling was powered by an electric cord running beneath the stage and the truck in the video wasn’t powered at all – it was taken to the top of a gradual incline and shown rolling downhill. However, Nikola continued to tout to investors its list of preorders supposedly representing $10 billion in revenue, despite having never made a single consumer-ready truck. Nikola also trumpeted the advanced technical specifications of a new product, a pickup truck called the Nikola Badger, in spite of the fact that the Badger never existed as more than a digital design. Between September 2020 and February 2021, a series of reports revealed the extent of Nikola’s alleged deceptions. Over the course of these disclosures, Nikola’s share price dropped by nearly 76%.
Former Nikola CFO Kim Brady, current Nikola CEO Steve Girsky, former Nikola CEO Mark Russell, current Nikola Board Chairman Steve Shindler, current Nikola Chief Legal Officer Britton Worthen, former Nikola board member Jeffrey Ubben, and Nikola founder and former CEO Trevor Milton are also named as defendants in the lawsuit.