Shares of Nikola plunged nearly 25 percent after General Motors scrapped plans to buy a stake in the electric truck manufacturer and produce its Badger pickup truck.
A new, slimmed-down deal maintains the companies’ fuel technology partnership but jettisons key components of a tie-up that thrust Nikola into the spotlight in September — just two days before a short-seller leveled sweeping fraud allegations against the firm and its founder, Trevor Milton.
“This went from a game changer deal for Nikola to a good supply partnership but nothing to write home about,” Wedbush Securities analyst Daniel Ives said.
The news sent Nikola’s stock price plummeting nearly 25 percent to a low of $21 a share in early trading Monday.
GM said it will no longer pay $2 billion for an 11 percent equity stake in Nikola following the fraud claims against Milton, who has also been accused of sexually assaulting two women when they were teenagers. Nikola has contested the fraud allegations and Milton has denied the assault accusations.
GM also no longer plans to engineer and manufacture the all-electric Badger pickup that Nikola unveiled in February. Nikola has said it would need to work with another company to make the truck, and it’s not clear whether another partner will emerge. Nikola says it will refund all order deposits that have been placed for the Badger.
The revised agreement calls for Nikola use GM’s Hydrotec hydrogen fuel cells in the environmentally friendly semi trucks that it expects to start testing by the end of next year. The companies will also discuss the possibility of Nikola using GM’s Ultium battery system in its vehicles.
GM did not explain why it dropped its plans to produce the Badger and take an equity stake in Nikola, but company executive Doug Parks called the new deal a recognition of GM’s “leading fuel cell technology expertise and development.”
Monday’s announcement ended weeks of questions about whether the deal would remain intact in the wake of the allegations against Milton, who stepped down as Nikola’s chairman in September. It also came just three days before a Thursday deadline for the companies to close the initial deal before either side could walk away.
Nikola CEO Mark Russell touted the revised deal as an “important step” for the company. The agreement is still subject to negotiations and “execution of definitive documentation,” according to a news release.
“Heavy trucks remain our core business and we are 100 percent focused on hitting our development milestones to bring clean hydrogen and battery-electric commercial trucks to market,” Russell said in a statement.
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