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Greed-to-Grief, No. 8

Greed-to-Grief, No. 8

Fool me four times, shame on me

George Pillari
June 19, 2025

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Nikola Tesla was a brilliant inventor and engineer who was central to how we use electricity today.

In the 1890s, Tesla teamed up with George Westinghouse to perfect a new type of transport system for electricity known as alternating current or AC, in which the electricity travels back and forth from the power source to the end point.

Up to that time, Thomas Edison’s direct current or DC was the de facto standard for transporting electricity. DC current flowed one way directly from the source to the end point.

The problem with moving any kind of energy, including electricity, is that it loses value as it is transported. Think of a melting ice cube. AC was much more efficient at transporting electricity over long distances with less degradation of power than DC and this is why much of the world’s electricity still uses AC more than 100 years after its invention.

DC is still the dominant method for transporting electricity for many applications, including car batteries.

So, it is ironic that the world’s best-selling electric vehicles made by Tesla (the car company) rely heavily on same DC power that Nikola Tesla upstaged with his AC power. (A Tesla vehicle converts the DC power to AC to run its motor.)

Since the Tesla name was already taken, Trevor Milton founded his electric truck company and called it, you guessed it, Nikola. So, now we have two electric vehicle companies that rely on DC power but are named after the man who pushed DC power aside with his invention of AC power. Go figure.

Nikola founder Trevor Milton

Milton’s Nikola made beautiful-looking trucks that used a combination of electricity and hydrogen to power their engines. The company raised $2.5 billion before going public and then watched its valuation climb to $30 billion, giving Milton a net worth of over $12 billion.

Less than three months after going public, Nikola’s stock price lost 75% of its value and soon lost all the rest. Nikola’s stock trades today for about 10 cents per share, down from almost $2,000 per share at its peak.

A Nikola truck

Nikola’s downfall was triggered by a report from Hindenburg Research, a research outfit that publishes analyses of businesses that look ready to take a big fall. (Like the data sleuths at Data Colada, I love these guys as well.)

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Hindenburg did not quietly suggest there may be problems at Nikola. It claimed Nikola was an intricate fraud built on lies perpetuated by founder Milton.

Here are Hindenburg’s comments on a Nikola stage presentation of one of its trucks:

We present behind-the-scenes photos showing that Nikola had an electricity cable snaked up from underneath the stage into the truck in order to falsely claim the Nikola’s electrical systems fully functioned.

Hindenburg was right.

After the stock crashed, our friends at the Securities and Exchange Commission and the Department of Justice stepped in. It was not long before Milton was convicted and sentenced to four years in prison and ordered pay $200 million of restitution.

While out of prison awaiting a hearing on his appeal, Milton donated $1.8 million to Donald Trump’s presidential campaign. Once in office as president, Trump granted Milton a full pardon.

Milton walked with no prison time and without having to pay a single dollar to the victims of his fraud who collectively lost hundreds of millions. Go figure, again.

The path from Greed-to-Grief

As is the case with most fraudsters, Milton’s Nikola was not his first rodeo. Three previous companies he was involved in were either dissolved or resulted in total losses for investors.

The businesses included an alarm company, a classified ad business, and a hybrid-truck company that was a precursor to Nikola.

Business failures do not automatically make a person a fraud. In fact, many professional recruiters look for failures in a person’s background to see how they rebounded from setbacks.

They also look for backlash directed at the founder from investors or employees suing and claiming they were lied to.

The thing about Milton was that the guy knew how to sell and get people to believe in him. At the time he was raising money for Nikola, everybody in the auto industry was trying to figure out an angle to catch up to Tesla. To his credit, Milton preyed on that FOMO.

If his BS at previous companies was not enough, Milton outdid himself at Nikola. He famously made a video of a Nikola truck cruising down the freeway looking good.

The problem was the video was a fake. The truck was towed to the top of a hill and was filmed rolling down the hill using gravity, not the awesome Nikola technology as its power.

With Milton long gone, Nikola did manage to deliver some trucks that actually worked. But the damage was already done and was too severe. The company filed for chapter 11 bankruptcy protection in February 2025.

Key Takeaways

Nikola was the fourth train wreck for Milton. Did anybody, I mean anybody, look into his background before wiring billions to the company?
If there were not enough red flags already, look at the changes Milton made right before Nikola went public. He sold $70 million of his stock and reduced his lock-up period from one year to 180 days. (A lock-up is a period after the IPO when an insider like Milton is forbidden from selling stock.) Additionally, he negotiated a $20 million separation bonus if he were to be terminated. C’mon man!
Milton’s incentives were not aligned with the company. He reaped huge rewards before the company ever delivered a functioning product. Misaligned incentives are always a danger signal.

Things I think about

The Secret Service was created in 1865 after the Civil War not to protect the president, but to combat counterfeiting of US currency. At that time, one-third of all US currency was counterfeit. Today less 1% of currency is counterfeit.

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Greed-to-Grief, No. 8

Fool me four times, shame on me

The path from Greed-to-Grief

Key Takeaways

Things I think about

Recommended reading

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