Mark Russell announced Thursday at the start of Nikola’s Corp.’s third-quarter earnings conference call. announced that the planned change of management in January to Michael Lohscheller was going so well that he was leaving early.
But there is more to it than that.
Nikola’s board of directors encouraged Russell to leave the helm of the electric truck and hydrogen maker early as he has exercised large amounts of his stock options every day since September 15.
“That [Nikola share] The price it is at makes it a problem,” Russell said in an interview with FreightWaves. “It’s looking bad. Not being the acting CEO anymore helps that look I think.”
Russell has been selling at least 75,000 shares per day since the Securities and Exchange Commission issued an Order 10b-5. It allows a company insider to automatically sell a predetermined number of shares on an ongoing basis until the order is cancelled. Executives promise not to act on inside information.
Russell Selling in a brutal market
“If I had known when I went ahead with the plan that the price was going to fall, I would have done it differently,” Russell said. “When we set it up in August, early September, that was it [Nikola share] The price was $6 or $7. I didn’t think we were in this place now.”
Nikola shares closed at $2.82 a share on Tuesday, near a 52-week low.
Just the volume of options Russell is paying out makes his earnings of about $5 million to date seem significant. He pays ordinary income taxes on the transactions.
Russell pointed out that he hasn’t fully sold any of the 2.8 million Nikola shares he owns. He also hasn’t sold any of the 39 million shares he owns, most of which he owns in a partnership with founder Trevor Milton, who is awaiting conviction on federal fraud convictions.
It’s not unusual for a CEO to retire and liquidate some of his interests in the company he runs, said Jay Kesten, an associate professor in Florida State University’s College of Law.
“I don’t think this is a particularly red rag,” Kesten told FreightWaves.
is russell #2 shareholder behind doomed founder
Russell is the second-largest shareholder in the startup after Milton, who bought 3 million shares in August. The stock’s falling value apparently caused Milton to reverse a real estate deal he made years ago. One of Milton’s fraud convictions was related to his use of Nikola stock options to purchase a ranch in Utah.
Insider sales are reported every few days on SEC Form 4, which is required when company directors or board members buy or sell stock.
The SEC insider trading page for Nikola shows Russell’s 30 Form 4 filings, which include 2.4 million shares converted from his more than 8 million stock options at a price of $1.06 each.
For Russell, it’s about diversifying his holdings, not making a statement about Nikola’s future.
“I’ve had almost all of my wealth and retirement in Nikola stock since the beginning,” Russell, 60, said. “That’s after 10 years of it being tied down in Worthington [Industries] Existed prior to that.” Russell was President and Chief Operating Officer of the globally diversified metals manufacturer from 2012 until he joined Nikola in 2019.
“All these years I’ve made promises to my wife that after I retire I’ll start diversifying,” he said. “She took me to financial planners and they said, ‘This is crazy.'”
Now that he’s got the 10b-5, he’s kind of stuck. He said it would be in effect “until sometime after the New Year”.
“Once you set these up, they’re on autopilot,” he said. “If you cancel them, you have to sit out [of trading] for a while.”
what could have been
Russell and his leadership team agreed in 2021 to work through 2023 for a salary of $1 a year in exchange for massive stock awards based on Nikola hitting three stock price notches – $25, $40 dollars and $55. It seemed like a good bet in a market where prices were rising quickly.
But the market reversal — the S&P 500 is down more than 30% this year — prompted Nikola to scrap the $40 and $55 levels and extend the $25 bogey to June 2024 from next June .
Had all levels of the original plan been met, Russell would have received $267.2 million in stock as CEO.
Because of his holdings, Russell remains on the board.
“The more we run, the more the market goes down,” he said. “But we are where we need to be strategic. And I just want to make sure we stay on this path.”
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