Nikola seeks Chapter 11 protection as demand struggles and financial difficulties persist.
Stock plummets to under $50 million valuation, down from a $27 billion peak in 2020.
Founder Trevor Milton’s fraud conviction, safety recalls, and high costs contributed to the downfall.
Nikola Corp. announced on Wednesday that it has filed for Chapter 11 bankruptcy protection, citing financial struggles, low demand, and high borrowing costs. The Arizona-based electric truck manufacturer intends to sell its assets and wind down operations, though some support services for its trucks and hydrogen-fueling infrastructure will continue through March.
The news is another setback for the electric vehicle (EV) sector, which has seen multiple startups—including Fisker, Proterra, and Lordstown Motors—file for bankruptcy as funding challenges and economic conditions make survival difficult. Nikola’s situation is a little different, however.
“Like other companies in the electric vehicle industry, we have faced various market and macroeconomic factors that have impacted our ability to operate,” Nikola CEO Steve Girsky said in a statement.
Nikola’s market valuation has fallen sharply from its 2020 peak of $27 billion to below $50 million as of Wednesday. Its stock price dropped 38% following the bankruptcy announcement.
Despite ramping up production of hydrogen-powered trucks in 2024, the company continued to incur substantial losses on every vehicle sold. High interest rates and a lack of widespread fleet adoption further strained Nikola’s finances.
The company reported $198.3 million in cash and cash equivalents as of September 2023, down from $464.7 million at the end of 2022. It now enters Chapter 11 proceedings with $47 million in cash on hand.
Nikola has faced a series of “challenges” since going public in 2020 through a special purpose acquisition company (SPAC) merger. Shortly after its listing, short-seller Hindenburg Research accused Nikola of misleading investors, which the company denied. The firm’s founder and former CEO, Trevor Milton, was convicted of fraud in 2022 and sentenced to four years in prison.
The company also dealt with operational hurdles, including a recall of all its vehicles in 2023 due to fire risks. Financial losses and limited market adoption persisted despite efforts to shift focus from battery-powered to hydrogen-powered trucks.
According to its bankruptcy filing in Delaware, Nikola listed assets worth between $500 million and $1 billion, with liabilities ranging from $1 billion to $10 billion.
The EV industry as a whole has faced growing competition, rising production costs, and slowing demand. Even Tesla, the market leader, reported its first annual sales decline in 2024, despite offering discounts and incentives.
Source: Reuters
