Apart from Nikola, Trevor Milton Sold Investors other startups that failed

(Wall Street Journal) – In 2009, Trevor Milton drove a Dodge pickup from Utah to Phoenix to show off his latest business idea: a truck using natural gas along with diesel to lower fuel costs.

Within months, Mr. Milton’s company had landed a $16 million contract to install the system on up to 800 semi trucks for Phoenix-based Swift Transportation Co., one of America’s biggest truckers, a copy of the contract shows.

Mr. Milton’s 10-employee startup converted just five trucks, and those didn’t produce the fuel savings Mr. Milton promised, said former employees of his company who were familiar with the road trip and the subsequent deal.

Mr. Milton, 38, resigned last month as executive chairman of his latest startup, electric-truck maker Nikola Corp. , after a short seller’s report said he made misleading claims about the company’s technology. He had previously persuaded well-known auto-industry figures to back Phoenix-based Nikola, which at its peak was valued at more than Ford Motor Co., making him a billionaire. It was among the most talked-about entrants among a host of companies trying to build a future for electric vehicles.

Nikola is by far Mr. Milton’s highest-profile blowup. But combined with the decade-old Swift deal and a number of other ventures in between, a pattern emerges for the self-described serial entrepreneur.

Mr. Milton through his career built businesses using charm and salesmanship. He often ended up with disputes, litigation and disappointed investors, according to former employees, customers, investors and documents.

As for Nikola, which he founded in 2015, Mr. Milton leaves behind a swirl of questions about what it can deliver. Since the negative report was released, the company has lost roughly 40% of its valuation and drawn Securities and Exchange Commission and Justice Department scrutiny, The Wall Street Journal and others have reported.

Mr. Milton declined to be interviewed. He and Nikola have called the short seller’s claims false and misleading.Stephen Girsky, a former General Motors Co. executive who succeeded Mr. Milton as executive chairman, said: “As a board, we’re trying to look forward now.”

People who have worked with Mr. Milton at Nikola and earlier businesses describe him as a leader who knows how to use bold visions to inspire employees and attract investors and customers. Casey Niederhauser, a designer until 2011 at one of Mr. Milton’s startups, uPillar.com, described him as always hustling. He recalled seeing Mr. Milton sprint so hard on a gym treadmill that patrons stopped workouts and stared.

“He’s a very talented salesman and good at finding exactly what people were about,” Mr. Niederhauser said, “tapping into that emotion or knowing the background of someone enough to know ‘What does this person need to hear from me to get on board?’ ”

Mr. Milton’s promise of trucks powered by batteries and hydrogen fuel cells persuaded auto-industry heavyweights to come on board. GM and Robert Bosch GmbH agreed to become suppliers. Investments came from industry veterans like Mr. Girsky, who leads the company that took Nikola public in June.

Mr. Milton offered executives a way to catch up and potentially leapfrog new competitors like Tesla Inc. that took the lead in the shift to electric vehicles and which investors have richly rewarded. He clearly needed help to realize his vision, and industry executives could provide technology, manufacturing and capital Nikola needed.

Nikola’s value, analysts say, lies in its big idea. It hopes to lease zero-emission vehicles to fleet operators that can refuel at future Nikola stations for a flat per-mile fee. A JPMorgan Chase & Co. analyst on Sept. 13 cited the lease model and Nikola’s partner-heavy approach as the company’s most compelling aspects. Some analysts have called Mr. Milton’s departure a positive step.

GM said it is continuing discussions to complete a deal to supply technology to Nikola in exchange for an equity stake. A Bosch spokesperson said the German company conducted due diligence and intends to continue working closely with Nikola.

Mr. Girsky, a former Wall Street analyst, said Wednesday he was confident in Nikola. “We poked holes in business models like this for 20 years,” he said. “The vision excited a lot of people. The job now is to execute.”

Flamboyant style
In his early ventures, Mr. Milton was fixated on emulating huge competitors, former colleagues said. He told investors in a 2012 shareholder letter that an e-commerce company he started “will become the largest competitor to Ebay in the next 1-2 years!” He named Nikola for Nikola Tesla, the inventor after whom Elon Musk named his electric-car company.

The Nikola founder embraced Mr. Musk’s flamboyant style, approach to social media and penchant for revealing far-from-ready products. Mr. Musk’s Tesla has sold hundreds of thousands of cars. Nikola has yet to sell a truck. Mr. Milton in a June television interview said he wanted to dethrone Ford’s F-150 pickup as the nation’s top-selling vehicle.

Mr. Milton was able to spin a novel strategy in an established industry, similar to how WeWork founder Adam Neumanndazzled investors with his vision of shared office space. Mr. Milton drew in investors by creating a business model that made hydrogen fuel, a long-established but uneconomic technology, look potentially profitable.

Mr. Milton grew up largely in southwest Utah, former colleagues said. His father, Bill Milton, was a Union Pacific Railroad manager who became closely involved in his son’s earlier business ventures. His mother died of cancer when he was young.

He has said publicly he didn’t finish high school and dropped out of college after one semester. In 2004, he started his first business, an ADT Security Services franchise in St. George, Utah, that he sold about two years later, according to Utah business records and the buyer, Glen Pilz.

Mr. Pilz said Mr. Milton overstated the business. In one instance, a roughly $30,000 contract turned out to be a bid it hadn’t won. Mr. Pilz went to collect from some clients who told him they had already paid Mr. Milton. Many employees weren’t licensed by the state, Mr. Pilz said.

“These things just started to mount,” he said. “Things that were baked in as part of the value of the business we had bought weren’t really there.” An ADT spokesman declined to comment.

In 2009, Mr. Milton started uPillar.com, a classified-ad website focused on cars. Former employees said it struggled to find dealership clients or attract customers and never turned a profit. Mr. Milton in a Forbes interview published in May said the site had 80 million monthly users, which the former employees dispute.

That year in St. George, he founded dHybrid Inc., the startup that landed the Swift contract, which included a $2 million upfront payment for research and development and to install the technology on the first batch of trucks, according to the copy of the contract.

Former dHybrid and uPillar employees said Mr. Milton co-mingled the two companies’ finances and sometimes had employees from one do work for the other. At one point, employees from the online retailer were assigned to work on dHybrid’s trucks to complete an order, one former employee said.

In a 2012 lawsuit, Swift claimed dHybrid spent some upfront money on unrelated spending, including personal use by unnamed officers or directors. It also accused the company of defaulting on a $322,000 loan from Swift. DHybrid countersued, claiming Swift stole its technology and took advantage of Mr. Milton, described by dHybrid’s attorneys as a “young, unsuspecting entrepreneur.” Both sides denied the other’s allegations, and the companies agreed in 2015 to end the litigation, court records show.

Swift merged with Knight Transportation in 2017. Knight-Swift declined to comment.

‘Vision and drive’
Even when things looked bad, Mr. Milton exuded confidence, said Tyler Satterfield, an early dHybrid employee who now owns a motor-sports shop. He said he has done work on several of Mr. Milton’s personal vehicles, including an off-road go-kart Mr. Milton had equipped with a nitrous-oxide system for extra power, a technique popularized in the “Fast & Furious” movie franchise.

“There were multiple times we faced nearly impossible circumstances, and he had a vision and drive that was infectious,” Mr. Satterfield said. “You wanted to be around the guy.”

Salt Lake City-based Sustainable Power Group LLC, or sPower, agreed to acquire dHybrid in May 2012 for about $3 million, according to a copy of a contract in a lawsuit sPower filed against dHybrid. The deal included money to pay back the outstanding loan to Swift.

By 2012, uPillar.com had laid off its employees and Mr. Milton shifted his money and attention to dHybrid, according to former uPillar and dHybrid employees.

A month later, sPower terminated the deal and sued dHybrid, alleging the company misrepresented its technology’s readiness, that its engine system didn’t perform as well as advertised and that it didn’t meet Environmental Protection Agency standards. DHybrid denied misleading sPower, and sPower later dropped the case, court documents show; dHybrid was effectively mothballed, some of the former employees said. A spokeswoman for sPower declined to comment.

Mr. Milton’s father in October 2012 incorporated a new company, dHybrid Systems LLC, in Utah, state records show. It operated from the same office with the same dHybrid sign on the door, the former employees said, producing natural-gas-delivery systems for garbage trucks and other large commercial vehicles. Mr. Milton’s father couldn’t be reached for comment.

The younger Mr. Milton sold about 80% of the company to Worthington Industries Inc., a metals manufacturer, for $12 million in cash in October 2014, according to Worthington’s SEC filings. Some backers of the original dHybrid said they were excited about the payday. When one called Mr. Milton to ask about his payout, Mr. Milton told him this was a different company, the investor said.

After the sale, Mr. Milton worked briefly for Worthington, quitting to build a truck powered by natural gas and batteries, said Mark Russell, a former Worthington executive and current Nikola CEO.

On his way out, Mr. Milton asked for Worthington’s support, Mr. Russell said. “If you’re smart, you’ll back me,” Mr. Russell recalled Mr. Milton’s telling him, “but either way, I quit.” Worthington couldn’t be reached for comment.

Nikola roots
Mr. Milton’s new venture would become Nikola. In June 2016, the company announced it had $2.3 billion in preorders for its truck. It was far from having anything resembling a working version, according to people who worked on the prototype.

A few months later, Nikola needed to raise more funding, said Mr. Russell, who worried falling diesel-fuel prices would doom any cost advantage for natural gas. Mr. Russell, who left Worthington to join Nikola in 2019, said he told Mr. Milton he needed a new approach.

Days later, Mr. Milton called and said, “hydrogen fuel cells,” Mr. Russell recalled. Nikola’s board, Mr. Milton told an online TV show this summer, “had a total panic attack.” But switching to hydrogen allowed Mr. Milton to sell investors on a zero-emission future where Nikola not only made trucks but controlled the network to fuel them, said people familiar with his thinking. At the time, Nikola didn’t appear to have any in-house resources dedicated to hydrogen, said the people who worked on the prototype truck.

While the company was developing the prototype, Mr. Milton would tell visitors about the truck’s hydrogen components. The people who worked on the prototype said they were flummoxed because there had been no substantive changes to the truck’s design.

In December 2016, Mr. Milton unveiled the Nikola One prototype, describing the truck as fully functioning.

It wasn’t. An extension cord powered the interior and headlights, two attendees said. It still had a disconnected natural-gas turbine from the days when Nikola trucks were going to run on natural gas, said the people who had worked on the prototype. The only hydrogen feature, they said, were the words “hydrogen electric” stenciled on its side.

A Nikola spokeswoman this week said the truck’s battery packs had been functional, albeit disconnected, and it was a groundbreaking proof of concept.

Nikola began to look like two companies. One reflected Mr. Milton’s interests and announced a range of products that fit them, including an all-terrain vehicle and zero-emission jet skis. Mr. Milton employed family and friends in crucial roles, including his brother Travis, the company’s director of hydrogen production and infrastructure. Before Nikola, Travis Milton had a construction business; he couldn’t be reached for comment.

The other Nikola was attracting auto-industry investment. In September 2017, it announced a Bosch partnership to collaborate on hydrogen fuel cells and motors; Bosch invested in Nikola. Brake company Wabco Holdings Inc. in December invested $10 million for a 1% equity stake, valuing the company at $1 billion.

Nikola had become a “unicorn.”

Mr. Milton took a $2.5 million loan from Nikola in March 2018, secured with his company stake, SEC filings show. A month later, he bought a $2.15 million house in Phoenix, Maricopa County records show. In 2019, he bought a 2,670-acre ranch in Utah for $32.5 million, the Journal reported. There, he planned to raise organic beef, grow organic produce and provide wildlife habitat on the property, he told the Journal.

Mr. Milton, a student pilot, bought three planes, including a Gulfstream G-V jet this spring from a fund led by investor Jeff Ubben, a Nikola shareholder, board member and chairman of its corporate-governance committee, documents reviewed by the Journal show. Mr. Milton paid for the jet with $6 million of Nikola stock, the company said.

Nikola in 2018 said it had a preliminary order for 800 trucks from Anheuser-Busch InBev SA . In September 2019, CNH Industrial NV invested $250 million in the company, valuing Nikola at $3 billion.

In March 2020, Nikola agreed to go public through a reverse-merger agreement with VectoIQ Acquisition Corp., a publicly traded special-acquisition company led by Mr. Girsky. When the shares started trading June 4, small investors poured in.

On Sunday night, June 7, Mr. Milton tweeted that the company was preparing to take reservations on a new pickup even though the company hadn’t announced a partner to build it. Nikola stock more than doubled the next day.

Tweets like those began bothering some board members, people familiar with the board said.

Short-seller shock
The Sept. 10 report by short seller Hindenburg Research that called Nikola a fraud was as much about Mr. Milton’s claims as the company. He had said its headquarters was covered in solar panels. Satellite photos in the report contradicted Mr. Milton’s claim.

Hindenburg also cited Mr. Milton’s claim last fall that Nikola would produce “game-changing” battery technology. So far, there has been no new technology, though Nikola said, in responding to the report, that it is excited about potential breakthroughs.

Mr. Milton, after stepping down as executive chairman, posted on his Twitter account that he intended to defend himself against “false allegations leveled against me by outside detractors.”

When Mr. Milton quit as executive chairman a week later, he left having collected $94 million in cash as part of the plan to go public and an earlier deal with a fund Mr. Ubben managed. He owns roughly a quarter of Nikola’s stock but gave up his board seat and must vote his shares with the board’s desires for the next three years, according to SEC filings.

Shortly after his resignation, Mr. Milton was accused by a cousin of inappropriately touching her when the two were teenagers. The woman, Aubrey Smith, said she has reported her allegations to the police in Utah.

“Mr. Milton strongly denies these false allegations. At no point in his life has Mr. Milton ever engaged in any inappropriate physical contact with anyone,” his spokesman said.

Nikola is shifting its message about its founder’s centrality. In filings this summer, the company had said: “Mr. Milton is the source of many, if not most, of the ideas and execution driving Nikola.”

His successor, Mr. Girsky, now says that when his own firm hit the road to discuss Nikola’s going public with prospective investors this year, it was Nikola’s president and finance chief who joined—not Mr. Milton.

“As this company went public,” Mr. Girsky said Wednesday, “it was migrating from a vision story to an execution story.”

Among customers and suppliers sticking with Mr. Milton’s vision are AB InBev and CNH. The beverage giant is continuing to work alongside its partners, including Nikola, to reduce its carbon emissions, said Ingrid De Ryck, AB InBev’s vice president of sustainability. At a factory that makes firetrucks in the southern German city of Ulm, CNH is installing a production line to build prototypes of Nikola’s Tre model, a battery-powered semi truck.

“For us,” a CNH spokeswoman said, “it’s business as usual.”