The stock was down as much as 30% in premarket trading before opening at $24.97. The shares rebounded a bit after the open, trading down by 20% in morning trading.
Stephen Girsky, a former vice chairman of General Motors and a member of Nikola's board, has been appointed chairman of the board, effective immediately.
Milton's departure follows the release of a report by short seller Hindenburg Research accusing him of making false statements about the company's technology to attract investors and partnerships with other automakers.
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 a deal with GM that sent both companies' shares soaring. It characterized Nikola as an "intricate fraud built on dozens of lies" by Milton.
The Securities and Exchange Commission and Department of Justice are reportedly looking into Hindenburg's claims.
In a statement Monday, GM said it will "work with Nikola to close the transaction we announced nearly two weeks ago to seize the growth opportunities in broader markets" with its battery electric and fuel cell technologies. GM is also helping to engineer and and will build the Nikola Badger pickup.
"Nikola, Honda and other companies who are looking to GM's technology as a platform for their products, represent just one part of our overall EV strategy," the company said. "Our overall goal is to put everyone in an EV and accelerate adoption."
Wedbush Securities' Daniel Ives described Milton's departure as "a gut punch" to Nikola's story and a "white knuckle period for Nikola bulls."
"It's a dark day for Nikola. Let's just call it like it is. Trevor leaving, he's a key part of the vision," he said Monday on CNBC's "Squawk Box." "That's something investors have sort of bet on … I still believe there's a story here, especially for GM."
Shares of GM were down 7% in morning trading Monday.