In what is being viewed as a warning to Wall Street’s hottest sector, federal authorities have filed criminal and civil securities fraud charges against Trevor Milton, founder and former chief executive of start-up automaker Nikola. Nikola was one of the first start-ups of note to go public via a special-purpose acquisition company (SPAC), also known as blank-check companies. The criminal charges against Nikola are, for many industry experts and regulators, proof of the inherent risk of SPACs; the blank-check companies, acting as vehicles for start-ups eager to go public, can often make it much easier for those start-ups to mislead or swindle investors through malfeasance or fraudulent reporting. This case asks students to evaluate what went wrong with Nikola and assess what changes might be introduced to SPAC investment.
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