Recently, the founder of a much-hyped electric truck company, Nikola Corp was arrested. Trevor Milton was accused of claiming that his company had manufactured working truck prototypes that would revolutionize the industry. He resigned in September.
The story does not end there. It ends with investors putting their hard-earned money into Nikola’s stock bidding the price up and attracting more and more ignorant investors all looking to make a fast dollar off of the hype. The founder meanwhile took the company public using a non-traditional IPO with a blank check company. His likely reason for doing that is that he would not have to endure the normal six-month waiting required in a normal IPO, thus able to sell the artificially inflated stock price and pocket millions.
The lesson here for investors is do not to buy stocks that do not make money. An often-repeated statement on our radio show and podcast. In this case, all the hype was a crafted complicated scheme to drive the stock price up so the founder can pocket his millions. Yes, he may go to jail and lose his millions, but you, the average investor, is the loser.