Today, most electric vehicle (EV) stocks caught bids once again, as this week shapes up to potentially be a green one for the sector. However, Nikola (NASDAQ:NKLA) stock has bucked the trend, closing down nearly 2% today. This move appears to be driven by news that Nikola founder Trevor Milton is now facing a new wire fraud charge.
This specific fraud charge appears to be tied to a property he bought, known as the Wasatch Creeks Range. Prosecutors allege that Milton made misleading statements about the company’s tech and business development to the seller. The seller had “accepted Nikola stock options as part of the purchase price based on Milton’s claims about the company.”
Trevor Milton, the founder and ex-CEO of Nikola — and a key beneficiary of the pandemic-related boom in EV stocks — has been the topic of great controversy for the company. While Milton has been out of the picture for some time, the fraud charges brought against him have certainly given investors pause.
Any company with a founder charged with fraud is likely to be in the penalty box for some time. However, when the headlines continue to bring attention to this fact, it’s perhaps much more difficult for said stock to rally even on positive days in the market.
Let’s take a deeper look into what’s behind the incredible decline in NKLA stock lately.
What’s Driving NKLA Stock Lower Today?
Approximately two years ago, NKLA stock traded just shy of $80 per share. Today, however, investors can pick up shares of the upstart EV company for around $5 a pop. That dramatic decline is in line with many other de-SPAC companies in the space, as investors have looked to de-risk their portfolios.
Nikola continues to be unprofitable as it attempts to ramp up production of its hydrogen and electric-powered trucks. Now, investors are becoming increasingly concerned about the demand picture coming out of what may soon be a recession. Fraud charges on top of this rather dismal macro backdrop don’t necessarily inspire confidence, either.
Trevor Milton’s ongoing issues appear to be his own at this point. However, it’s the cocktail of negative catalysts piling up that continue to worry investors. Nikola may indeed be a high-leverage bet on the long-term growth of the EV sector. But for right now, investors aren’t nearly as bullish on this outlook as they once were.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.