Nikola files for Chapter 11 bankruptcy protection

April 2025 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

April 2025 Issue

Electric vehicle maker Nikola has filed for Chapter 11 bankruptcy protection months after saying that it would likely run out of cash in early 2025.

In late February, the company and certain of its subsidiaries filed voluntary petitions under Chapter 11 of the Bankruptcy Code in the US Bankruptcy Court for the District of Delaware. Nikola has also filed a motion seeking authorisation to pursue an auction and sale process.

In its bankruptcy filing, Nikola, which has said its Coolidge, Arizona, manufacturing facility can produce about 2400 vehicles per year across three shifts, listed assets of between $500m and $1bn. It estimated its liabilities were between $1bn and $10bn. Nikola’s cash and cash equivalents dropped sharply to $198.3m at the end of September 2024, compared with $464.7m at the end of 2023. The company said it was entering Chapter 11 proceedings with $47m in cash on hand.

Nikola said it decided to initiate a sale process of its assets to maximise value and ensure an orderly wind down. The firm will continue some operations for trucks in field and some hydrogen-fuelling operations through the end of March. The proposed bidding procedures, if approved by the court, would allow interested parties to submit binding offers to acquire Nikola’s assets, purchased free and clear of Nikola’s indebtedness and certain liabilities.

“Like other companies in the electric vehicle industry, we have faced various market and macroeconomic factors that have impacted our ability to operate,” said Steve Girsky, president and chief executive of Nikola. “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, and the Board has determined that Chapter 11 represents the best possible path forward under the circumstances for the Company and its stakeholders.”

Phoenix, Arizona-based Nikola was founded more than a decade ago. The company went public in June 2020 and delivered its first vehicle in December 2021. However, it has endured a challenging last few years. At its peak in 2020, Nikola was valued more than Ford Motors at $30bn, signed a multibillion-dollar deal with General Motors, and was considered the pinnacle of vehicle start-ups to go public through reverse mergers and special purpose acquisition companies.

But in recent years, a series of scandals has enveloped the company and its former chairman and chief executive Trevor Milton. Mr Milton was convicted of wire fraud and securities fraud in 2022 for exaggerating claims about his company’s production of zero-emission trucks, leading to sizeable losses for investors. In December 2023, he was sentenced to four years in prison. The company paid $125m in 2021 to settle a civil case against it by the US Securities and Exchange Commission. Nikola did not admit any wrongdoing.

The company’s core products are all-electric and fuel cell electric semitrucks, which it began producing in 2022. As of the third quarter of last year, the company had only produced 600 of the vehicles. Many of those vehicles have been recalled due to defects, costing the company tens of millions of dollars.

Nikola is the latest in a string of high-profile EV companies to collapse after failing to meet high expectations. Other EV start-ups that failed include Lordstown, Proterra and Fisker. Funding for capital intensive projects such as EVs has dried up amid high interest rates and flagging demand.

Richard Summerfield