The Billionaire Founder Of Nikola Motors Explains Why His $3.3B Company Needs Small Business Rescue Cash




Last Friday, when a $349 billion emergency loan program authorized by Congress to avoid wasting America’s small businesses from the coronavirus ran dry, mom-and-pop businesses across the country threw their arms up within the air: Though they were quickly running out of money, their requests for loans weren’t met.

Instead, a stream of economic disclosures made by over 100 companies showed that over $500 million in cash visited publicly-traded corporations, some with valuations within the billions and with many ample dollars in annual revenues. within the aftermath, came a public backlash.

Senator Marco Rubio and Treasury Secretary Steven Mnuchin warned of “severe consequences” for recipients taking loans in violation of the rescue program’s certifications about being a little business. Large restaurant chains like Shake Shack, Ruth’s Chris, and Kura Sushi quickly returned their small business rescue cash.

But there are some prominent holdouts.

Trevor Milton, the billionaire founding father of hydrogen truck unicorn Nikola Motor Co., isn’t prepared to return his company’s $4.1 million loans, first reported by Forbes. The loan was made by JPMorgan Chase as a part of the Tiny Business Administration’s Paycheck Protection Program, aimed toward helping small businesses survive the pandemic.

“I wish I could see into the long run about how long the virus shutdown will affect us for. Right now, it's been an enormous help to hide the 2 months of payroll with the PPP,” Milton tells Forbes by email.

It’s been a busy 12-months Milton’s company, which has raised many ample dollars in the capital at a multi-billion dollar private valuation. The capital raises made Milton a billionaire supported the worth of his stake within the company. Just before the coronavirus, Nikola Motor Co. struck a merger with a publicly-traded acquisition vehicle called VectoIQ. The deal valued the startup at $3.3 billion and also included a $525 million capital raise from blue-chip investors including Fidelity and hedge fund ValueAct Capital.

The sheer size of Nikola’s private valuation and its gargantuan capital raise made Forbes question its need for funds earmarked to assist small businesses like bars, restaurants, and dry cleaners manage past this economic shutdown.

On Monday, Nikola Motors chief treasurer Kim Brady told Forbes the corporate needed the rescue cash as a bridge to retaining its workers while its giant merger closes.

“There's a difference between a high valuation and having cash,” Brady said during an interview. “We are a pre-revenue company with plenty of expenses… Our burn rate is high.”

Brady also made clear that Nikola Motors believes it's the sort of company that the government’s rescue funds are speculated to help.

Despite its high valuation, Nikola features a small staff of about 300 workers, many of them skilled and highly paid engineers, but it doesn’t yet generate substantial revenue. Since PPP funds are going to be wont to retain staff, Brady said the lifeline follows the spirit of the Act. “We're preserving high paying jobs,” he claimed.

In a CNBC interview on Friday afternoon, Milton reiterated the purpose. However, he indicates to Forbes he’s undecided about whether the corporate will eventually repay the loan, or return the cash.

“There are many variables that will affect our decision thereon,” says Milton in an email exchange. “I'd like to understand how long the state and government finish off will persist. How long until we can internationally travel open up our factory in Ulm Germany that we just started retrofitting for the battery-electric Nikola Tre. How long state to state borders are going to be closed, when can we start work on our USA facilities, what percentage people we help keep employed, and the way many we hire with the PPP funds.”

That Nikola Motors needs PPP cash underscores just how costly Milton’s hydrogen truck vision is. Nikola is hoping to create hydrogen trucks for long-haul routes which will be economically competitive with electric trucks being unveiled by companies like Tesla. it'll also make electric-powered trucks for shorter routes, Forbes’ Alan Ohnsman reported during a September feature.

He wrote: “From a Phoenix headquarters which will also build prototype semis, Milton has raised quite $500 million from such investors as European heavy-duty vehicle maker CNH Industrial, manufacturing and tech giant Bosch, hedge fund ValueAct, South Korea’s solar powerhouse Hanwha, Norwegian energy company Nel Hydrogen and Worthington Industries, a metals manufacturer. He needs a minimum of $1 billion to create a factory in Coolidge, Arizona, but the primary trucks on the road and open ten fueling stations in California and Arizona.”

That month, Nikola raised $250 million, including $100 million in cash and $150 in services, adding to the $265 million the corporate had already raised. In November, the Wall Street Journal reported Milton paid $32 million for a 2,000-acre ranch in Utah. And in March, Milton struck his biggest deal yet for Nikola, inking a merger that produces his company poised to hit public stock markets with over half a billion dollars within the bank.

Despite the grandeur of his dreams, Milton now says coronavirus has put Nikola in tenuous condition.

“Keeping my employees paid so that they will pay their mortgages is priority much loved,” he says.