Nikola Bankruptcy: SEC Faces Uncertain Payout
Nikola Corp.'s bankruptcy has placed the US Securities and Exchange Commission (SEC) atop the list of unsecured creditors, with an outstanding claim of approximately $80 million. This debt stems from a $125 million enforcement settlement reached in 2021.
The SEC's chances of obtaining full payment are uncertain. Nikola is currently ranked 1st among unsecured creditors, but the company's financial situation may not allow for full repayment of all debts. The SEC is grouped with other unsecured creditors, including Microsoft Corp. and Smithers Tire & Automotive Testing, who lack priority claims on specific assets.
Nikola CEO Stephen Girsky disclosed that the company made an initial $25 million payment to the SEC in 2021. The agency agreed to an alternative payment plan in 2023, which is currently under review. The SEC has declined to comment beyond its official filings.
Nikola faced SEC scrutiny for its founder's alleged misleading statements regarding the company's technological capabilities, production capacity, and potential orders. The founder was subsequently convicted of fraud. Nikola settled the SEC's allegations without admitting wrongdoing and arranged semi-annual installments of $25 million.
However, the payment schedule was revised in July 2022, significantly reducing the amount due. Nikola has made payments of $1.5 million in each of the first and second quarters of 2023, and $0.8 million in the third quarter.
In typical bankruptcies, priority is given to legal fees, advisors, and senior lenders. Junior lenders and bondholders follow, with unsecured creditors like the SEC receiving whatever remains. Given Nikola's current market valuation of approximately $39 million, the SEC's recovery prospects are likely limited.