Nikola is seeking Chapter 11 bankruptcy protection under the US Bankruptcy Code and asked the court to allow it to start an auction and sale process. Business operations will continue with some limitations – but only until the end of March. The company will need to find a buyer or partner to survive beyond that date.
The electric truck manufacturer Nikola, founded in 2014, is running out of money. Today, 19 February, Nikola Corporation and nine subsidiaries filed for bankruptcy protection at the United States Bankruptcy Court in Delaware. The aim of such proceedings in the US is reorganisation. If a company is completely insolvent and sees no basis for continuing to operate successfully, it is liquidated in accordance with the rules of Chapter 7 of the US Bankruptcy Code.
By filing for bankruptcy protection, Nikola is now shielded from legal action by debtors until its intended reorganisation is completed. The company from Phoenix, Arizona, also states that it still has around $47 million in cash to cover the period until a planned sale.
The Chapter 11 filing does not come as a surprise. In December, the electric truck manufacturer warned in a mandatory notification to the US Securities and Exchange Commission that it did not have enough money to survive the next quarter. To reduce its expenses, Nikola laid off employees on a large scale. At the end of January, first rumours emerged that Nikola was considering selling parts of the company or the entire company. Subsequently, at the beginning of February, competitor Mullen Automotive publicised its intention to buy Nikola’s battery business.
Nikola hopes for a “structured sales process”
None of it was enough to achieve a turnaround – and Nikola has not publicised any further restructuring plans. Instead, the company states that it has applied to the court for authorisation for an auction and sale process (in accordance with Section 363 of the US Bankruptcy Code). That is because “following months of actively pursuing these alternatives, the Company determined that a structured sale process represents the best possible solution to maximise the value of its assets.” The intention is to sell all or part of the assets and initiate an orderly wind-down of the business.
If the court grants Nikola’s request, interested parties could submit binding offers to acquire Nikola’s assets. To bridge the time until a potential buyout, business operations will continue “on a limited basis,” and the remaining employees will continue to be paid. “Subject to Court approval, the Company intends to continue certain limited directly provided (non-dealer) service and support operations for trucks currently in the field, including certain HYLA fueling operations through the end of March 2025,” Nikola added. Thereafter, one or more partners will be required to support these activities.
Nikola President and CEO Steve Girsky says his company, like others in the electric mobility industry, “faced various market and macroeconomic factors” that have impacted its ability to do business. “In recent months, we have taken numerous actions to raise capital, reduce our liabilities, clean up our balance sheet and preserve cash to sustain our operations. Unfortunately, our very best efforts have not been enough to overcome these significant challenges, and the Board has determined that Chapter 11 represents the best possible path forward under the circumstances for the Company and its stakeholders,” said the former GM executive.
Nikola recently lost USD 200 million per quarter
All of the company’s annual reports published to date reveal that Nikola has been deeply in the red for years, with no improvement in sight. Only in the first half of 2024 did it once look as if the company might recover somewhat. That was an interlude. In December, the US portal Electrek stated that Nikola was losing around 200 million dollars per quarter.
And even beyond the liquidity bottlenecks, Nikola has had quite a few problems. Several industry observers predicted the company’s demise a good two years ago when the former founder and CEO Trevor Milton was convicted of fraud. He had lied to shareholders about the company’s technology. The compensation amounts continue to play a role today.
Even after the court case against Milton, things continued to be chaotic. In 2023, Nikola decided to sell its entire stake in the European joint venture with Iveco to the Italian truck manufacturer, which was tantamount to withdrawing from Europe. In the same year, Nikola had to recall all 209 battery-powered trucks it had delivered. Nevertheless, the company had already increasingly focussed on fuel cell trucks. In principle, however, Nikola never got out of the capital-intensive startup phase. In addition to the acute financial worries, the company is also said to have recently felt legally encircled. According to Electrek, Nikola is facing several lawsuits from shareholders, suppliers and partners.
Nikola is now a good ten years old. The company’s track record includes the launch of the first commercially available Class 8 H2 trucks in North America and the development of an H2 refuelling station network called HYLA that connects Northern and Southern California. According to CEO Girsky, Nikola customers have travelled 3.3 million miles with the company’s battery-electric and fuel cell trucks, and the HYLA refuelling station network has dispensed over 330 tonnes of hydrogen.
