Nikola founder Trevor Milton can sell his 91.6 million shares starting Tuesday as insider lockup period expires

Ousted Nikola founder and Chairman Trevor Milton is the company’s largest shareholder with more than a fourth of the start-up’s shares, and he can sell all of them beginning Tuesday.

Milton, who disappeared from the public eye and deleted all social media accounts after resigning in a haze of controversy in September, once again has Wall Street’s attention. He owns about 91.6 million shares of Nikola – valued at about $1.9 billion based on Monday’s closing price – that he can trade for the first time since the company went public in early June.

There are up to 166 million shares, including Milton’s, held by other insiders and early investors that are eligible to be traded starting Tuesday. With roughly 360.9 million shares of company stock outstanding, Milton is by far Nikola’s largest single shareholder.

A sell-off in the shares could add to an already volatile week for Nikola stock. The shares tanked by 26.9% to $20.41 on Monday after Nikola announced a scaled-back deal with General Motors. GM gave up an equity stake in the electric truck maker as well as plans to produce the Badger, an electric pickup that was supposed to be the company’s first foray into the consumer market.

Shares of Nikola plummeted by as much as 18.3% in heavy trading Tuesday morning. More than 60 million Nikola shares had been traded as of 1:40 p.m. Tuesday.

Read more: Nikola shares see another ugly sell-off in volatile trading as insider lockup period expires

The company promises to make all-electric semitrucks powered by hydrogen fuel cells that GM has agreed to supply, though Nikola has yet to mass produce.

Much of Milton’s wealth is believed to be tied up in Nikola shares, which have been cut by 40% since he left the company after accusations of fraud and sexual abuse cropped up. A spokesman for Milton declined to say what he plans to do with the shares. The company also declined to comment on the lockup period ending.

RBC Capital Markets analyst Joseph Spak predicts that Milton will sell some, but not all, of his shares.

Any sell-off of those shares could create “considerable additional selling pressure in the very near term,” Deutsche Bank’s Emmanuel Rosner wrote in a note to investors Monday. Rosner, who is maintaining his hold rating on the stock, warned investors early Monday that there was “large volatility ahead” for Nikola shareholders.

Several analysts said the scaled-back deal would likely weigh on Nikola’s shares in the short term but have little relevance in the company’s long-term plans. JPMorgan analyst Paul Coster even said a pullback in the shares could be “a good buying opportunity.”

The stock is already under pressure after GM dropped its equity stake in Nikola, Wedbush analyst Dan Ives said, adding that it adds to “lingering lockup worries” for investors. He reiterated an underperform rating and is maintaining his $15 price target for Nikola.

“This went from a game changer deal for Nikola to a good supply partnership but nothing to write home about and the Street will be disappointed accordingly along with lingering lockup worries,” Ives said.

A total of approximately 161 million shares of common stock will become eligible for sale beginning Tuesday, according to Nikola’s third-quarter SEC filing. An additional 5 million shares may also become eligible for sale depending on the price of the company’s stock. Milton’s ownership includes 6 million shares in “founder options” he could give out to early employees.

More Nikola shares were expected to be eligible for trading Tuesday, but investors who hold 136.5 million shares agreed to extend their lockup until April 30. That includes 39.8 million shares held by a company that’s controlled by Nikola CEO Mark Russell but co-owned with Milton, Russell told CNBC last week.

Milton stepped down after the Department of Justice and Securities and Exchange Commission started investigating allegations of fraud raised by short seller Hindenburg Research in September.

Hindenburg accused Milton of making false statements about Nikola’s technology in order to grow the company and partner with auto companies. The report, titled “Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America,” was released two days after the company announced its initial $2 billion deal with GM that sent both companies’ shares soaring. It characterized Nikola as an “intricate fraud built on dozens of lies” by Milton, who has denied several of the claims.

In addition to the federal inquiries, two women have since filed sexual abuse complaints with Utah authorities against Milton. Both allegations were more than 15 years old but separately involved Milton’s cousin and an office assistant.

Through a spokesman, Milton “strongly denied” the women’s accusations.

– CNBC