- Nikola and General Motors on Monday announced a long-awaited deal, but on scaled-down terms.
- GM won’t take a stake in the embattled startup but will sell its hydrogen fuel cells to Nikola to use in its trucks.
- Plans for Nikola’s Badger consumer truck have been cancelled.
- Shares of Nikola plunged as much as 21% following the announcement.
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General Motors and Nikola on Monday announced an update to the deal that set in motion a tumultuous fall for the high-flying truck startup.
Under the new terms, the two companies will still work to integrate GM’s fuel cells into Nikola trucks, but GM will no longer take a $US2 billion stake in Nikola. The startup also said plans for its Badger pickup â€” a potential F-150 competitor â€” were cancelled, with refunds planned for customers who preordered.
The announcement, which included no financial details, came days before the December 3 deadline that the companies had set for reaching a deal.
Shares of Nikola plunged as much as 21% in early trading after the announcement. And more volatility is possible: Shares owned by executives and other insiders before Nikola’s public debut become available to sell this week as a lockup rule expires.
In a separate filing on Monday morning, Nikola said it planned to offer more than 50 million new shares for sale, further fuelling the stock’s slide.
Nikola has had a wild ride since talks of a deal with GM were made public in September. A few days later, a short-selling investment firm published a scathing research report alleging intricate fraud at the company and numerous lies by its founder, Trevor Milton, who has since relinquished his title as chief executive.
Nikola denied most of the allegations but acknowledged some of the report’s most striking examples, including an instance in which it rolled an inoperable truck down a hill in order to film a video. Nikola said it never implied the truck could drive on its own.
JPMorgan, which remains bullish on the stock, said Monday’s announcement was ultimately a positive move, even without a GM stake.
“We think this is a positive outcome for Nikola over the medium to longer term, since the company can now focus on the core Class 8 truck initiative and avoid the distraction and capex associated with the Badger pickup,” the bank’s analysts wrote. “But GM’s commitment seems much more modest, which might weigh on investor sentiment regarding NKLA stock in the short term, just as we approach the 161 million lockup expiry tomorrow.”
- Read more about Nikola’s tumultuous year:
- Nikola founder Trevor Milton’s cousin alleges he sexually assaulted her when they were teenagers
- Nikola’s founder Trevor Milton is now an official member of Forbes’ 400 billionaires list with a net worth of more than $US5 billion
- A leaked 2016 business plan reveals that Nikola is likely to fall $US277 million short of the 2020 revenues it predicted four years ago
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