Nikola’s Milton Was ‘Hyper-Focused’ on Company’s Stock Price, CFO Tells Jury

(Bloomberg) — Nikola Corp.’s Trevor Milton was so “hyper-focused” on the company’s stock price that when the shares fell $5 on their first day of trading in June 2020, he thought something was wrong with the Nasdaq, jurors at his criminal fraud trial were told.

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At the time, the electric-truck maker Milton founded was completing a reverse merger and would end the day with a market value of $12 billion. Chief Financial Officer Kim Brady testified in New York Friday that he explained to Milton the decline was “simply supply and demand,” but Milton insisted Brady contact the exchange.

“Did you do that?” Assistant US Attorney Matthew Podolsky asked.

“No, I did not,” Brady said.

Prosecutors claim Milton made false statements to investors about the company’s progress toward manufacturing hydrogen fuel cells and marketing vehicles in order to artificially inflate Nikola’s value and his own wealth.

They say Milton fooled investors by making inoperable products look fully functional and lied about the company’s technology and partnerships. The defense argues that Milton was just following the company’s marketing plan and never said anything he didn’t believe to be true.

Brady told jurors that it was a constant battle to get Milton, the company’s biggest shareholder, to focus on building long-term value rather than obsess over retail investors and stock-price fluctuations.

On its third day of trading, Nikola shares doubled, and jumped above $90 a few days later before allegations of exaggerated claims began to erode the shares. When Nikola stock declined, Milton would often feel pressure to pump up the stock price by hyping the company on social media or in interviews, according to Brady.

Read More: Nikola Founder Milton Went Rogue on Social Media, Jury Is Told

“He needs to chill,” Brady told Mark Russell, the company’s chief executive officer, in an August 2020 text that was shown to jurors.

Brady said he frequently told Milton that public statements by him and other top company executives needed to be accurate.

“We should not focus on short-term stock price movements, which do not represent the true value of the company,” Brady said, recounting his advice to Milton. “We have to be careful what is actually tweeted, what’s on social media because you will influence retail investors and their decisions to buy the stock.”

“Mr. Milton regularly ignored my advice.”

Russell testified earlier in the trial that he, Brady and Nikola’s top in-house lawyer found Milton’s hype so risky that the three threatened to resign in 2020 if he didn’t step down as executive chairman. Milton was forced out of the position by Nikola’s board.

‘Top 100’

Brady said Milton one day showed him a list of the wealthiest people in America, on which he was ranked around 270.

“He told me one of his goals was to be in the top 100,” Brady said. How to get there? “The share price would have to be higher,” Brady said.

Brady testified he projected billions of dollars in losses from a Milton-engineered deal with General Motors Co. to build the Badger pickup truck.

“This is not a good deal,” Brady said in a text to Russell. “We should walk away.”

The company signed the GM deal, but it unraveled after a September 2020 short-seller’s report that accused Milton and Nikola of deception. The Badger was never built.

Brady sent an email to top Nikola executives in August 2020 projecting a net loss of $3.2 billion from the GM deal from 2022 to 2026. Brady also estimated a cumulative cash flow loss of $4.6 billion for the same period.

On cross-examination, Milton’s lawyer suggested his client’s belief that Nasdaq was somehow broken showed that he’s relatively “naive” about the stock market. He also tried to show that differences between Milton and Brady over matters including the Badger and focusing on retail over institutional investors were just “business disagreements,” not fraud.

“Some say ‘tomato,” some say ‘to-mah-to,’” said the lawyer, Marc Mukasey, invoking the old George and Ira Gershwin song about unimportant differences.

A prosecutor said the government expects to rest its case against Milton next week.

Read More: Nikola Founder Milton Faces Jury in His Toughest Sales Job

The case is US v. Milton, 21-cr-478, US District Court, Southern District of New York (Manhattan).

(Updates with questions by defense lawyer.)