What happened

The U.S. government formally filed charges in July against Trevor Milton, the founder and former CEO of Nikola (NKLA -2.67%), and investors fled the stock as a result. Shares of Nikola lost 34.3% in July, according to data provided by S&P Global Market Intelligence, as investors fret about what the future holds for the once-promising electric truck start-up.

So what

The charges filed against Milton were no surprise for investors familiar with the Nikola story. The company burst onto the scene last year with designs for green trucks and pickups, but the excitement quickly faded following a devastating report that short-seller Hindenburg Research released last September. Milton resigned soon after, and investors in the months since have been worried about how much of a business there is behind the hype.

Two Nikola prototypes in the desert.

Nokola prototypes. Image source: Nikola.

In an indictment released in late July, the Justice Department leveled many of the same accusations that Hindenburg had brought up. The government claims Nikola's original prototype semi truck wasn't fully functional, the engineering work wasn't done on other models, and that Milton and Nikola made false claims about the progress in areas including orders, battery development, and hydrogen production.

The allegations might not be new, but they have a lot more weight now that it is the U.S. government, and not just a short-seller, making the claims.

Now what

Milton is long gone, and it can be argued that the charges involve actions in the past. In that sense, the news in July wasn't necessarily bearish for Nikola, but there still is little reason to get excited about the company.

Nikola is still trying to design and build trucks for what is becoming a crowded electric vehicle market. If it succeeds, there is potential upside for the stock. But given the uncertainty and the long odds, it remains a very speculative investment.

This business isn't nearly as easy as the U.S. government says Milton tried to suggest, and investors are reacting accordingly.