Electric truck company Nikola files for Chapter 11 bankruptcy protection — Calls it ‘best possible path forward’

Electric truck manufacturer Nikola has filed for Chapter 11 bankruptcy protection, culminating a downslide marred by economic challenges, leadership changes, and weak sales.

In a press release on Wednesday, February 19, Nikola stated that the company and some of its subsidiaries had filed voluntary petitions for Chapter 11 bankruptcy.

The EV maker added that it had filed a motion in Delaware for pursuing an auction and sale process for its assets under Section 363 of the US Bankruptcy Code.

Nikola bankruptcy: What company said

The company has approximately $47 million in cash to fund the foregoing activities, ensure the implementation of the post-petition sale process as well as exit Chapter 11. It intends to request the court to authorise a sale of assets in a manner that balances its monetary needs with its efforts to maximize profit for its shareholders.

The bidding process, if approved by the court, will allow interested parties, which may include both financial and strategic buyers, to submit binding offers for acquiring Nikola’s assets. These assets will be free and clear of the company’s indebtedness and some liabilities.

The EV manufacturer intends to continue providing limited (non-dealer) service and support operations for its trucks plying on the road, including hydrogen refueling. This will continue till the end of March this year. After that, Nikola will need partners to support such endeavours.

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As per Bloomberg, Nikola listed reported assets between $500 million and $1 billion in court documents. Its liabilities were listed between $1 billion and $10 billion.

Nikola CEO Steve Girksy comments on bankruptcy filing

Grisky stated that his company had undertaken several measures over the past few months to reduce liabilities, raise capital, and preserve cash for sustaining operations. But their best efforts have not proved enough to tackle challengers, leading the company’s board of directors to focus on Chapter 11 as the “best possible path forward”.

Nikola's financial problems

Nikola went public in 2020. It has faced several issues over the years. Its founder Trevor Milton was convicted in 2022 of securities fraud and wire fraud. Nikola underwent a series of leadership changes, with Stephen Girsky’s appointment as CEO in 2023 marking its fourth change in chief executive officers in four years, CNN reported.

The company tried to ramp up production of its hydrogen-powered fuel-cell electric trucks, but lost cash amounting to hundreds of thousands of dollars for every sale. Issues like high costs for setting up charging stations, pinched budgets of fleet operators have made the EV landscape tough for companies like Nikola. Canoo Inc. and Fisker Inc. are other EV makers that have faced financial troubles recently.

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FAQs

1. Why did Nikola file for bankruptcy protection?
The company was unable to raise capital and stem losses, so it filed for Chapter 11 bankruptcy protection.


2. What is Nikola famous for?
The company is known for electric trucks.