Mark Russell announced at the beginning of Nikola’s Corp.’s third-quarter earnings call Thursday that the planned January leadership transition to Michael Lohscheller was going so well that he was leaving early.

But there is more to it.  

Nikola’s board of directors encouraged Russell to leave the helm of the electric truck and hydrogen maker early because he has been cashing out large amounts of his stock options daily since Sept. 15. 

“The [Nikola share] price where it’s at makes it an issue,” Russell said in an interview with FreightWaves. “It looks bad. Me no longer being the sitting CEO helps those optics, I think.”

Russell has sold at least 75,000 shares a day since a Securities and Exchange Commission 10b-5 order took effect. It allows a company insider to automatically sell a predetermined number of shares on a continuing basis until the order is canceled. Executives promise they are not acting on inside information.

Russell selling into a brutal market

“If I would have known when we put the plan in place that the price was going to fall, I would have done it differently,” Russell said. “When we were setting that up in August, early September, the [Nikola share] price was $6 or $7. I didn’t dream we’d be in this place right now.”

Nikola shares closed Tuesday at $2.82 a share, near a 52-week low.

Only the volume of options Russell is cashing out makes his approximately $5 million in proceeds to date seem significant. He is paying ordinary income taxes on the transactions.

Russell pointed out that he has not sold any of the 2.8 million shares of Nikola stock he owns outright. Nor has he sold any of the 39 million shares that he owns most of in a partnership with founder Trevor Milton, who is awaiting sentencing on federal fraud convictions.

A retiring CEO liquidating some of his holdings in the company he led is nothing unusual, said Jay Kesten, associated professor at the College of Law at Florida State University.

“My sense is that this is not a particularly red flag,” Kesten told FreightWaves. 

Russell is No. 2 shareholder behind convicted founder

Russell is the startup’s second-largest shareholder after Milton, who purchased 3 million shares in August. The falling value of the stock apparently led to canceling a real estate deal Milton entered years ago. One of Milton’s fraud convictions was linked to his use of Nikola stock options to purchase a Utah ranch.

Insider sales are reported every few days on SEC Form 4, required when company executives or board members buy or sell stock. 

The SEC insider trading page for Nikola shows 30 Form 4 filings by Russell covering 2.4 million shares converted from his more than 8 million stock options priced at $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 net worth and my retirement in Nikola stock from the beginning,” the 60-year-old Russell said. “That’s after 10 years of it being tied up in Worthington [Industries] stock before that.” Russell was president and chief operating officer of the global diversified metals manufacturing company from 2012 until he joined Nikola in 2019.

“All those years, I promised my wife that when I retired, I would start to diversify,” he said. “She would go with me to financial planners, and they would say ‘This is crazy.’”

Now that he has the 10b-5 in place, he is sort of stuck with it. He said it is in effect “until sometime after the new year.”

“Once you put those in place, they’re on auto pilot,” he said. “If you cancel them, you have to sit out [of trading] for a while.”

What might have been

Russell and his leadership team agreed in 2021 to work for a salary of $1 a year through 2023 in exchange for massive stock grants based on Nikola hitting three share price tiers — $25, $40 and $55. It  looked to be a good bet in a market where prices rapidly appreciated.

But the market reversal — the S&P 500 is down more than 30% this year — led Nikola to cancel the $40 and $55 tiers and extend the $25 bogey until June 2024 from next June.

Had all the tiers in the original plan been met, Russell as CEO stood to get $267.2 million in stock. 

By virtue of his holdings, Russell remains on the board.  

“The more we execute, the more the market goes down,” he said. “But we’re where we need to be strategically. And I just want to make sure we stay on that path.”  

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Click for more FreightWaves articles by Alan Adler.

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