Electric truck startup Nikola is still short of clearing a shareholder hurdle to raise new funds, the company said Thursday – hampered by the objections of its disgraced and now-departed founder.
The long-embattled company is seeking to raise money by issuing new stock, a process that requires shareholder approval. Nikola’s June 1 annual shareholder meeting was abruptly adjourned after its founder and former CEO and chairman, Trevor Milton, voted against the proposal.
The company briefly resumed the meeting on Thursday, and Nikola Chairman Stephen Girsky told shareholders that while the vote is now close, the proposal hasn’t yet passed. Girsky readjourned the company’s annual meeting to July 18 in order to give shareholders more time to vote.
Girsky said about 48% of Nikola’s outstanding shares have voted in favor of the proposal to allow the company to increase its total number of shares outstanding. The proposal requires 50% to pass.
“Stockholders have voted overwhelmingly in favor of Proposal 2, with the exception of a single stockholder who appears to represent over 85% of the votes against Proposal 2,” Girsky said.
According to Girsky, holders of more than 112 million, or roughly 25%, of Nikola’s outstanding shares have yet to vote. He didn’t name the single stockholder voting heavily against the proposal, but Milton is the only shareholder who controls that many shares.
The company spent the past month rallying shareholders to vote for the proposal in sufficient numbers to overcome Milton’s “no” vote. Those efforts will continue until Nikola’s annual meeting resumes on July 18, when the final vote tally — or possibly, another adjournment — would be announced.
Milton remains Nikola’s largest shareholder. He owns 11% of the company’s stock outright and controls roughly 9% more via an investment vehicle that he co-owns, giving him effective control of about 90 million shares in total.
Votes representing roughly 95 million shares were cast against the share-increase proposal as of June 1.
Nikola stock was up about 3% in midday trading.
The company isn’t in urgent need of cash, but the flexibility to sell more stock is important to its future. Nikola raised $200 million via a convertible note issue in May, and it had $385 million in cash and another $409 million available via an equity line from Tumim Stone Capital as of March 31, for a total of about $1 billion on hand.
CFO Kim Brady said in May that with the convertible note sale, Nikola had ample cash on hand to fund its operations for at least another year without additional raises. But the company is burning about $180 million per quarter, and a share offering was built into its plans for later this year, Brady said at the time.
Approval of the proposal requires “yes” votes from a majority of the company’s outstanding shares. As of the June 1 meeting, 64% of the total votes cast were in favor of the share-increase proposal. But that 64% represented only 42% of the company’s outstanding shares, not enough to pass the measure over Milton’s objection.
Milton, who founded the electric heavy-truck company in 2015, left Nikola in September of 2020 after short-seller Hindenburg Research accused him of making false statements about the company’s technology to investors. A federal grand jury indicted him on three counts of fraud in 2021, and a fourth count was added last week. His trial is scheduled to start in July.
Federal prosecutors have alleged that Milton built an elaborate scheme intended to boost Nikola’s stock for his own gain, by lying about the company’s technology, the state of its product development, and its likely future sales prospects.