Nikola’s Collapse Puts SEC’s $80 Million Claim at Risk
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Nikola Corp.’s bankruptcy included an unusual leader atop the customary list of biggest potential losers — the Securities and Exchange Commission — and the agency’s chances of getting its claim fully paid might be dim.
The SEC ranked No. 1 on the roster of largest unsecured creditors when Nikola, a failed maker of EV trucks, sought court protection on Feb. 19, with the regulator owed about $80 million, according to the company’s Chapter 11 petition.
The debt reflects what’s left of a $125 million enforcement settlement signed in December 2021. It’s unclear whether the company will have to pay the remainder when the bankruptcy is settled. For now, the SEC is lumped in with other unsecured litigants and suppliers that don’t have claims on any specific collateral, ranging from Microsoft Corp. to Smithers Tire & Automotive Testing.
CEO Stephen Girsky said in a court filing Feb. 19 that Nikola made an initial $25 million payment at the end of 2021 and that the SEC agreed in 2023 to “an alternative payment plan” that’s now “subject to determination.”
The SEC declined to comment beyond its filings. Although the agency leads Nikola’s list, it’s not the first time the SEC has found itself among bankruptcy creditors, and the court can stymie the regulator’s efforts to make fines stick.
Nikola ran afoul of the agency for allegedly misleading statements its founder made to investors about the electric-vehicle startup’s technological advancements, production capabilities and potential orders. The saga eventually included a fraud conviction of the firm’s founder stemming from the deceptions. They included a prototype truck that seemed to be moving on its own power but was actually rolling down a slope because of gravity.
The company had settled the SEC’s allegations without admitting to wrongdoing and worked out a schedule of $25 million semiannual installments.
That arrangement didn’t last long, with a revision in July 2022 slashing the periodic amounts to a fraction of the original schedule, according to regulatory filings. Payments of just $1.5 million were made in the first and second quarter of 2024 and $0.8 million in the third quarter, according to court papers.
Under laws that govern a typical bankruptcy, the lawyers, advisers and senior lenders get repaid first, followed by junior lenders and bond holders. Unsecured claimants, which in this case include the SEC, divide up anything left over, which frequently means little or nothing.
Riding the enthusiasm for electric vehicles, Nikola once had a higher market value than Ford Motor Co. Now trading at less than 50 cents a share, the company is valued at about $39 million.
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