Nikola Founder Trevor Milton Hangs Legal Defense on Expert Testimony

“If information is important, it should change the stock price,” Prof. Ferrell told the jury. He said his analysis showed that Nikola stock moved up or down for other reasons.

Prof. Ferrell was expected to finish up on Tuesday but the trial was delayed until next week after a defense attorney tested positive for Covid-19. Mr. Milton’s lawyers have previously said they may call a second expert who works as an engineering professor. Mr. Milton told the judge Monday that he didn’t intend to take the stand in his own defense.

Prosecutors alleged Mr. Milton lied about nearly every aspect of the company, including the status of its trucks and technology. They said he made false statements on social media, podcasts and television interviews, which misled tens of thousands of ordinary investors into buying Nikola stock. When the stock value plummeted after a short-seller report detailed alleged misstatements by Mr. Milton, these investors suffered losses, prosecutors said.

The prosecution rested its case on Friday, after calling witnesses including Nikola employees, investors and their own experts.

Nikola, which settled a related Securities and Exchange Commission investigation for $125 million, has said it cooperated with the government.

Mr. Milton, 40 years old, faces two securities-fraud counts and two wire-fraud counts. To prove securities fraud, the government has to show he made an untrue statement or omitted a fact that would matter to a reasonable investor.

“A battle in this trial is who is the reasonable investor, and what would a reasonable investor consider important,” said Edward Imperatore, a former federal securities-fraud prosecutor who is now a partner at Morrison & Foerster LLP. “Milton is seeking to demonstrate that on days he supposedly made false statements to the market, the market didn’t think those statements were important in making investment decisions.”

Prof. Ferrell, who began testifying Friday afternoon, analyzed a period from June 4, 2020, when Nikola went public, through Sept. 30, 2020, shortly after Mr. Milton resigned in the wake of the short-seller report. During that period, most of the changes in stock price could be explained by market and industry factors or random volatility, he told the jury.

On a handful of other days, he said, the stock largely moved due to analyst reports or press coverage of company announcements, not Mr. Milton’s statements.

During cross examination, a prosecutor asked Prof. Ferrell if he had spoken to ordinary investors, some of whom testified in court that Mr. Milton’s statements had influenced their investing decisions. Prof. Ferrell said he hadn’t.

Defense cases are typically significantly shorter than the prosecution’s presentation. Defense attorneys tend to build their case through cross examination of government witnesses and documents so their client won’t need to take the stand, said Mr. Imperatore, the former federal prosecutor. He said jurors could view a substantial defense case as an implicit acknowledgment that prosecutors had been effective.

“There is an optical issue at play,” he said.

Write to Corinne Ramey at corinne.ramey@wsj.com