What happened

Shares of electric heavy-truck start-up Nikola (NASDAQ:NKLA) were trading lower on Thursday morning, after the U.S. Department of Justice revealed that the company's founder and former CEO, Trevor Milton, has been charged with making false statements to Nikola investors.

As of 11 a.m. EDT, Nikola's shares were down about 7.9% from Wednesday's closing price.

So what

In an indictment revealed on Thursday morning, the Justice Department -- specifically, the office of the U.S. Attorney for the Southern District of New York (which includes Manhattan) -- charged Milton with two counts of securities fraud and one count of wire fraud. 

Simply put, the government alleges that Milton made a series of "deceptive, false, and misleading claims" that induced auto investors to buy Nikola's stock. Among them: 

  • That the company's original prototype electric semi truck was fully functional.
  • That the planned Nikola Badger pickup was a fully engineered product designed by Nikola.
  • That Nikola was already producing hydrogen (to fuel its planned fuel-cell electric trucks) at a below-market cost.
  • That Nikola was developing its batteries and other key components in-house.
  • That Nikola had binding orders for its trucks that represented billions of dollars in future revenue.

The government alleges, in considerable detail, that all of those statements were false and intended to mislead investors into buying Nikola's stock.

A rendering of the Nikola Badger, a proposed electric pickup truck.

Milton made bold claims about a pickup called the Badger, which turned out to be vaporware. To the extent that Nikola had any plans to actually develop the truck, it abandoned the effort after Milton left the company in September of last year. Image source: Nikola.

If the allegations sound familiar, it's because many of them originated with a devastating report that short-seller Hindenburg Research released last September. That report led to a number of events, including Milton's abrupt resignation from the company he founded and a steep decline in Nikola's stock price.

Now what

Clearly, Milton himself is in deep trouble -- and if the allegations are true, he should be in deep trouble.

But is his indictment really bearish for the current Nikola company? I'm not so sure. 

Nikola on Thursday released a statement pointing out (rightly) that Milton hasn't had any role at the company since his resignation on Sept. 20 of last year. The company also noted that it has cooperated with the government throughout its investigation and -- significantly -- that Nikola itself wasn't charged in today's indictment.

From an investing perspective, I still think Nikola is a long shot to compete with the established heavy-truck makers, all of which are working on zero-emission semis of their own. But that said, if the company succeeds in establishing a significant presence in the market against the odds, the stock could do well. 

I still think I wouldn't personally own it. It's too risky for my tastes. But if you decide to take a flyer at today's prices, with money you can afford to lose, I won't argue. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.