Nikola slips 17% after striking long-awaited deal with General Motors that doesn't include crucial equity stake

  • Nikola Corp. slipped 8% on Monday after it announced a long awaited deal with General Motors.
  • The pair signed a memorandum of understanding that General Motors will provide Nikola with its Hydrotec fuel-cell system for use in Nikola’s commercial semi-trucks.
  • The deal does not include General Motors taking an equity stake in Nikola or an OEM partnership to build Nikola’s Badger pickup truck.
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Nikola Corp. briefly surged, and then dipped on Monday after the company said it reached a memorandum of understanding with General Motors to work together on the production of Nikola’s commercial semi-trucks.

The MOU replaces a previously announced deal that included General Motors taking a $US2 billion equity stake in Nikola and the two companies working together to build the Badger pickup truck.

Shares of Nikola briefly surged as much as 25% in Monday pre-market trades after the deal was announced, but those gains quickly evaporated after it was revealed in the MOU the General Motors would no longer take an equity stake in Nikola, nor would it help the company build its Badger pickup truck.

Nikola traded down as much as 17% to $US23.30 in Monday trades. The MOU comes on the same day that Nikola’s lockup period for insiders ended, allowing millions of shares to be sold by certain Nikola insiders.

Under the terms of the MOU, Nikola will incorporate General Motors’ Hydrotec fuel-cell technology into its Class 7 and Class 8 zero-emission semi-trucks for the medium and long haul trucking sectors, according to the release.

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Nikola expects to begin testing prototypes of its fuel-cell powered trucks by the end of 2021, with testing of beta prototypes scheduled to begin in the first half of 2022. The two companies will also “discuss the potential” for the utilization of General Motors’ Ultium battery system in the Class 7 and Class 8 vehicles.

“Heavy trucks remain our core business and we are 100% focused on hitting our development milestones to bring clean hydrogen and battery-electric commercial trucks to market,” Nikola CEO Mark Russell said.

While the MOU doesn’t encapsulate all of the terms of the previously announced deal, it is likely better than nothing after Nikola and its founder Trevor Milton were accused of fraud and misleading investors in a short report from Hindenburg Research.

Following the report, Milton voluntarily stepped down from the company as chairman in late September, even as the company dismissed many of Hindenburg’s claims.

Nikola’s MOU with General Motors is subject to negotiation. Nikola will refund all previously submitted order deposits for the Badger pickup truck.

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