April 10, 2024
Board directors of electric truck maker Nikola Corp. and the blank-check company that took it public for $3.3 billion in 2020 must face shareholders’ derivative claims of insider trading, securities fraud and merger-related breaches after Delaware’s Court of Chancery on Tuesday denied more than half of the defense’s motions to dismiss.
In a telephonic bench ruling, Chancellor Kathaleen St. J. McCormick preserved eight of 15 counts in the shareholders’ consolidated class action and derivative complaint, finding that they had adequately pled claims against directors and insiders at Nikola and the special purpose acquisition company that bought it, VectoIQ Acquisition Corp.
Nikola stockholder Barbara Rhodes filed her derivative complaint against 10 of the company’s officers and directors in January 2022, alleging that they looked the other way while the company’s founder and CEO Trevor Milton carried out a criminal fraud before and after the merger.
Rhodes alleges that insiders of the Phoenix-based company allowed Milton to intentionally mislead investors about the company’s prospects and ability to build zero-emission trucks, artificially inflating the company’s valuation to as high as $28.77 billion in an “old-fashioned ‘pump and dump’ scheme.”
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Nikola stockholder Barbara Rhodes is represented by Peter B. Andrews, Craig J. Springer, Andrew J. Peach and David M. Sborz of Andrews & Springer LLC, Julie Goldsmith Reiser, Richard A. Speirs and Benjamin F. Jackson of Cohen Milstein Sellers & Toll PLLC, Frank J. Johnson, Brett M. Middleton and Jonathan M. Scott of Johnson Fistel LLP, Gregory DelGaizo of Robbins LLP and Blake A. Bennett of Cooch & Taylor PA.