In December 2021, the Securities and Exchange Commission (“SEC”) announced that Nikola Corporation (“Nikola”) agreed to pay $125 million to settle charges that the company allegedly defrauded investors and misled them about its products, technical advancements, and commercial prospects. Nikola did not admit or deny the SEC’s findings.   Earlier that same year, the SEC filed against Nikola’s founder and former CEO, Trever R. Milton, for allegedly disseminating false and misleading information about Nikola’s products and technical accomplishments by communicating with investors through social media.

Mr. Milton founded Nikola in 2015, with the intent to manufacture and sell low emission semi-trucks that run on alternative fuels and to build alternative fuel station infrastructure to support those vehicles. In 2020, Nikola merged with VectoIQ Acquisition Corp., a special purpose acquisition company (“SPAC”) created in 2018. On June 3, 2020, Nikola and VectoIQ consummated the merger and VectoIQ changed its name to “Nikola Corporation.” Nikola’s common stocks and warrants began trading on Nasdaq Global Select Market in June 2020.

The SEC Cease and Desist Order (the “Order”) stated that, before Nikola had produced commercial products, Mr. Milton, an avid user of social media, embarked on a public relations campaign via tweets and media appearances. The Order states, “From approximately March 2020 through September 2020, in his capacity as CEO and later as Executive Chairman of Nikola, Milton made materially false and misleading statements on numerous critical topics related to Nikola’s capabilities, technology, reservations, products, and commercial prospects.”

Without admitting or denying the SEC’s findings, Nikola agreed to (1) cease and desist from future violations, (2) certain voluntary undertakings, and (3) the $125 million settlement. Nikola agreed to continue cooperating with the SEC’s ongoing investigation. Finally, the Order established a Fair Fund to return the penalty proceeds to alleged victim investors.

As social media provides a  unique platform for greater engagement and communication with shareholders, corporations should be mindful of how they are portrayed by their executives on social media.


Thanks to Danielle Donofrio, who contributed to this post.