Nikola Declares Bankruptcy, Will Sell Off Assets
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Truck maker Nikola Corp. filed for Chapter 11 bankruptcy protection Feb. 19 and plans to auction off its assets after a tumultuous 18 months featuring multiple rounds of layoffs, regular executive turnover and an increasingly fervid hunt for more funds or a buyer.
Failing to find a white-knight buyer willing to bankroll hydrogen fuel cell electric and battery-electric Class 8 truck production, although Nikola came close, the company sought court protection in Delaware for “an orderly wind down of the business.”
A first hearing on the bankruptcy will be held at 10 a.m. ET on Feb. 20 before the U.S. Bankruptcy Court for the District of Delaware.
The company said it plans to pursue an auction and sale process under Section 363 of the U.S. Bankruptcy Code. A stalking horse bidder will be sought. A stalking horse bid is an initial offer for the assets, meaning there is a bar other bidders cannot undercut.
If necessary, the auction will take place March 31, according to court documents, with the sale likely by the end of the second week of April.
Chief among the sale items will be the company’s refurbished and retooled manufacturing plant in Coolidge, Ariz., the intellectual property related to the trucks plus unused parts and unsold rolling stock.
Nikola representatives were not immediately available for comment Feb. 19 on how many trucks would go under the hammer. Around 150 battery-electric trucks were unsold as of November.
The company still has to return a number of battery-electric trucks recalled due to problems with batteries produced by one-time subsidiary Romeo Power, the production assets of which were sold to Mullen Automotive for $3.5 million in September 2023.
Brea, Calif.-based medium-duty truck maker Mullen also bought a battery production line and testing laboratory equipment from Nikola at the end of January.
The sale of the assets followed multiple rounds of layoffs as Nikola sought to stem cash burn.
Nikola confirmed cutting 135 positions in October, and further job losses are understood by Transport Topics to have taken place in December. Layoffs also occurred in June 2023 and November 2022.
By October, the company’s bank balance was approaching the point of no return.
Nikola reported a loss of $200 million in the third quarter of 2024, which while sizable, was less than half its $425.5 million loss in the year-ago period.
However, Nikola’s cash and cash equivalents as of Sept. 30 totaled $198.3 million, compared with $464.7 million at the end of 2023.
Chief Financial Officer Tom Okray told analysts during the company’s Q3 earnings call the money would run out at some point in the first quarter of 2025 if no additional funding sources were found, and that proved to be the case.
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“We are examining every opportunity to optimize cash,” said Okray, who joined Nikola in March 2023 from component maker Eaton Corp., adding: “We continue to seek to maintain sufficient capital to support our business.”
That included seeking partners, CEO Steve Girsky said, and building a “coalition of the willing.”
Nikola entered into a nonbinding letter of intent with one unidentified interested party that conducted “extensive diligence” over a period of weeks, but could not reach a deal, according to court documents.
In December, the “international vehicle manufacturing company” signed the letter, but it later walked away after intimating an interest in buying all of Nikola’s assets through a bankruptcy sale.
More than 20 parties were previously contacted about acquiring Nikola as a going concern, the filings show, and “two … international automotive manufacturers expressed interest in a possible transaction.”
As many as 24 financial investors were contacted about bankrolling Nikola in the final months of 2024, but “general feedback was that the investment required to achieve the business plan was too difficult for a financial investor without a strategic interest in the assets to make given the long and uncertain path towards profitability.”
By February, the hunt ended.
“Like other companies in the electric vehicle industry, we have faced various market and macroeconomic factors that have impacted our ability to operate,” Girsky said in a statement accompanying the Chapter 11 filing.
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“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,” he added.
Girsky assumed the helm at Nikola in August 2023, replacing Michael Lohscheller as the company’s top executive. Lohscheller was only in the role 11 months. The German, who resigned at Nikola for health reasons, is currently CEO at carmaker Polestar.
A former GM executive, Girsky hired a number of his erstwhile colleagues at the U.S. automaker, including Mary Chan as chief operating officer. Girsky also wore the CFO hat before Okray was hired.
