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Nikola Shakeup at the Top: Executive Chairman Departs Company

Monday, September 21, 2020 | Steve Anderson
Nikola Shakeup at the Top: Executive Chairman Departs Company

Sometimes it's a good sign when a company is willing to make tough choices in order to pursue the greater good of improved returns and better share prices. Usually those “tough choices” end up landing on the rank-and-file, who are let go in large numbers and the survivors told to take over their workloads. Sometimes, though, those tough choices go straight toward the top. Nikola (NASDAQ:NKLA) made those tough choices today as its executive chairman Trevor Milton announced he'd step down from his current positions within Nikola.

A Sacrificial Lamb?

It was just 10 days ago when disaster seemingly struck for Nikola, as Hindenburg Research released a report that called attention to the Nikola product line, and made startling allegations of fraud within the company. To give you an idea of how far the report went, it alleged that Nikola functioned as an “intricate fraud”, targeting nearly everything from its Badger truck line to its deal with GM (NYSE:GM).

Not surprisingly, Nikola responded indignantly, noting that several of the Hindenburg allegations were “false and misleading,” though the allegations were apparently enough to prompt a plan for investigation from both the US Department of Justice and the Securities and Exchange Commission (SEC).

Thus, in a move to potentially limit the damage to the company—which has already been pretty substantial; the company is down nearly a third in this morning's pre-market trading alone—Nikola's founder and current executive chairman (as well as board member) Trevor Milton is voluntarily stepping down from his position. Milton noted that the focus should be on the company, and not on himself and his leadership therein, so he simply pulled out of the way.

Replacing Milton as chairman will be current board member Stephen Girsky. Girsky formerly served as vice chairman of General Motors, so he should be in an excellent position to step in.

Collateral Damage at GM

The GM connection to Nikola runs fairly deep, and well beyond Girsky. GM recently established a position in Nikola, buying 11% of the company, and setting up plans to not only produce the Badger line of electric pickup trucks but also some of the hydrogen infrastructure involved therein. GM assured those concerned that “appropriate diligence” had been done prior to the $2 billion deal with Nikola, but it wasn't enough to stop a 4% drop in GM's own stock.

GM, and by extension CEO Mary Barra, had already been under fire for previous moves featuring Chinese construction of products, so this event comes at a bad time for the company. However, GM is currently planning to keep up with the development in progress at Nikola, as it dovetails well with current plans at GM. Such plans include the growth of the Hydrotec hydrogen fuel cell and the Ultium battery system.

Maybe for the Best 

Nikola's CEO, Mark Russell, noted that the company still plans to focus on its key priorities, which seem little different from any other company. The company plans to continue working on its “strategic initiatives”, building the company into a complete “zero-emissions transportation solutions provider,” and building value for its shareholders.

Milton's possible misconduct certainly could have been an impediment to that, so his departing the company could be viewed as a positive development. By Milton leaving, he's separated the company clearly into two eras: the Milton and the post-Milton eras. With former GM brass now at the helm, the ability to question the whole thing does tend to slump.

The more cynical, however, may note that Milton wouldn't depart the company unless something was indeed afoot. Why separate the company into those two separate eras if something hadn't been done? Whether or not something was done almost becomes a secondary point; the new point is that now it looks more like something has been done.

However, with GM now a much stronger player within the company, it's wholly possible that any issues—if there ever were any to begin with—can be contained, and Nikola going forward can focus much harder on its stated goals. This may be a turnaround opportunity in the making, and with Nikola now at a new lower price, keeping an eye on product developments may be a valuable move.

Companies Mentioned in This Article

CompanyBeat the Market™ RankCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Nikola (NKLA)0.0$20.72+1.3%N/AN/AHold$37.20
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7 Gold Stocks to Buy Before the Fed Changes Its Mind

Just when investors thought that the price of gold couldn’t go any higher, the Federal Reserve added fuel to the fire. On July 29, the Fed said there was not sufficient evidence of an economic recovery to warrant changing their current policies. Not only does that mean that interest rates will stay at or nor zero, but that the Fed may initiate other actions as well. In his statement after the Fed meeting, chairman Jerome Powell said the Fed was “not even thinking about thinking about raising rates.” And while the novel coronavirus was certainly a factor, it’s not the only factor. The Fed is looking intently at the collateral damage from the lockdown measures in March and April. Over 14 million Americans who had jobs in February are unemployed. And many of those jobs will not be coming back.

This is creating the perfect scenario for gold and gold stocks. The price of gold has surged over 25% in 2020. At the time of this writing, it sits at $1,953 per ounce. Of course as soon as gold starts to near $2,000 the cries that the rally is over begin.

Are they right again? Maybe, but I’m a little skeptical. Gold always climbs during times of uncertainty. That’s true today more than ever. We’re months away from a presidential election. We’re learning how to live with a novel virus for which there is no vaccine. We have social unrest that has turned into riots in many major cities.

With that in mind, here are seven of the best gold stocks that you can invest in right now.

View the "7 Gold Stocks to Buy Before the Fed Changes Its Mind".

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