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GM partner Nikola received grand jury subpoenas from Department of Justice

Kalea Hall
The Detroit News

Detroit — Both Nikola Corp. and its founder received grand jury subpoenas from the Department of Justice in September after a short-seller accused the startup of fraud, according to a Monday filing with the Securities and Exchange Commission. 

Nikola and Trevor Milton, who resigned as chairman of the company shortly after the fraud accusations, both received grand jury subpoenas from the U.S. Attorney’s Office for the Southern District of New York and the N.Y. County District Attorney’s Office. Grand juries are commonly used in criminal investigations. 

Nikola Corp. is still negotiating a deal to form a strategic partnership with General Motors Co.

Nikola's officers and employees also received subpoenas from the SEC after Hindenburg Research LLC released the Hindenburg Report, which accuses Nikola of misleading investors by misrepresenting its technology and manufacturing capabilities.

General Motors Co. and Nikola have yet to close on a deal forming a strategic partnership for the companies to produce electric and fuel-cell vehicles together. But discussions between the two are continuing, and GM executives have remained positive about them.

Experts say GM is likely asking for a higher stake in the company than the 11% previously announced before the Hindenburg report caused Nikola's stock to tank. The deal could be terminated by either company if the closing doesn't occur by Dec. 3.

"The contemplated agreement, which would give GM an equity stake in Nikola in exchange for various in-kind services, is not yet closed but discussions do continue and we'll give you further updates when appropriate or required," Nikola CEO Mark Russell said Monday on an earnings call. 

The agreement announced Sept. 8 allowed Nikola to utilize GM’s new Ultium battery system and Hydrotec fuel-cell technology for its vehicles. Also under the agreement, GM would engineer and manufacture the Nikola Badger truck's battery-electric and fuel-cell versions. Nikola would give GM $2 billion in newly issued common stock, representing an 11% stake in its company, but the deal was set when Nikola's stock was trading at $41.93 a share. Mid-Tuesday the stock was trading at $18.15.

The Hindenburg Report caused Nikola to incur "significant expenses as a result of the regulatory and legal matters," according to the Monday SEC filing. The total cost will depend on several factors, including the length of the investigations. Nikola has refuted the allegations by Hindenburg.

Russell told investors on the call that Nikola had contacted and briefed the SEC during the quarter with concerns about the report published by the short-seller.

"Our counsel has been in close contact with the SEC and the Department of Justice, and we are fully cooperating with both in their requests for information and documents," Russell said on the earnings call. "We remain focused on achieving our stated milestones and in continuing to drive our business forward and create value for our shareholders."

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