Nikola, the struggling electric vehicle manufacturer, has officially sought Chapter 11 bankruptcy protection, just months after warning that it would deplete its cash reserves early this year.

Once hailed as a promising start-up and a rising star on Wall Street, Nikola became entangled in controversy. Its founder, Trevor Milton, was convicted in 2022 for misleading investors regarding the Arizona-based company’s technology.

During the trial, prosecutors revealed that a promotional video showcasing a prototype truck appeared to show it driving down a desert road. However, this was actually footage of a non-operational vehicle that had merely been rolled down a hill.

The initial excitement surrounding Nikola was considerable. In 2020, the company reached an estimated valuation of $30 billion—outpacing the market cap of Ford Motor Company.

Despite this initial success, Nikola has struggled to scale its operations, primarily focused on electric trucks. In the third quarter, the company produced just 83 trucks while incurring a staggering net loss of nearly $200 million. In comparison, 77 trucks were produced in the second quarter, with losses approaching $134 million.

Nikola has filed for bankruptcy protection in the United States Bankruptcy Court for the District of Delaware and announced on Wednesday its intent to seek approval for an auction and sale of its business.

Currently, the company holds approximately $47 million in cash. Nikola Corp. aims to maintain limited service and support operations for existing vehicles, including fueling services, until the end of March, pending court approval. The firm acknowledged that additional funding will be necessary to sustain these operations beyond that point.

CEO Steve Girsky commented, “Like many companies within the electric vehicle sector, we have encountered various market and macroeconomic challenges that have affected our operational capabilities.” He emphasized the company’s attempts to secure funding and reduce liabilities in recent months, yet noted that these efforts fell short.

“The Board has concluded that pursuing Chapter 11 is the most viable option given the current circumstances,” Girsky remarked.

In December 2023, founder Trevor Milton received a four-year prison sentence after being found guilty of fraudulent practices that inflated claims about the company’s zero-emission 18-wheeler production, resulting in significant investor losses.

Milton was characterized by prosecutors as a con artist, six years after he established the company in a basement in Utah.

Evidence presented during the trial demonstrated that Milton falsely asserted he had developed a groundbreaking truck that was, in fact, merely a General Motors vehicle with Nikola branding.

Nikola’s current CEO testified against Milton, stating that Milton had a tendency to exaggerate claims when presenting the company to investors.

Milton’s resignation in 2020 followed allegations of fraud, which caused Nikola’s stock to plummet. Investors sustained heavy financial losses as concerns grew regarding Milton’s assertions that the company had successfully produced zero-emission 18-wheel trucks.

In 2021, Nikola agreed to pay $125 million to settle a civil case initiated by the SEC, while the company did not admit to any wrongdoing.

Beyond its internal issues, Nikola has faced a challenging landscape for electric vehicle manufacturers due to declining sales. Former President Donald Trump has vowed to dismantle what he inaccurately refers to as President Joe Biden’s “electric vehicle mandate.”

This directive essentially aims to revoke a non-binding target set by Biden that aims for electric vehicles to comprise half of all new car sales by the year 2030. Trump is also likely to advocate for the repeal of a $7,500 tax incentive for new electric vehicle purchases, a measure included in Biden’s landmark 2022 climate legislation, known as the Inflation Reduction Act.

As of late last year, Nikola’s shares, based in Phoenix, Arizona, had dipped below $2, and following the latest developments, the stock plummeted by another 40%.