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Saturday, January 16, 2021

Electric Vehicle Manufacturer Nikola’s Shares Tumble After General Motors (GM) Walks Away From Stake In Nikola

General Motors (GM) announced this Monday that the company will not continue to have a stake in Nikola, a company that designs and manufactures electronic components, drivetrains and vehicles. Owing to the news of GM’s recent decision to scuttle its marquee vehicle, Nikola shares plummeted by 26%.

Nikola released on Monday, its updated term with General Motors (GM) in a supply-dealer agreement replacing the one that was already in place since September. According to the earlier deal, GM would have had an 11% stake in Nikola but not anymore.

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According to the previous deal, Nikola was also allowed to use GM’s battery tech, new electric truck underpinnings and the fuel cell. However, the new deal scratches these off the list. This is especially bad news for Nikola as it entirely guts Nikola’s plans for its Badger or an alternative fuel cell.

Nikola’s Shares Plunge Following New Supply Deal With GM

In a recent statement, Nikola mentioned that the company will be returning early deposits made by customers who pre-ordered their alternative fuel cell, Badger.

Wedbush Analyst, Dan Ives mentioned that GM as Nikola’s partner might be good news for the company later on. However, no equity or ownership stake in Nikola is likely to be a major blow for the company, particularly now that major R&Ds are off the table. Rather than being a game-changer for the company, this deal with GM became a good partnership but with no returns.

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Partnership talks have been going on between the two companies since late September when GM mentioned that negotiations are going on regarding its $2 billion role in Nikola.

It is also important to note that Nikola’s shares started plunging following the resignation of Nikola’s Chairman and Founder Trevor Milton after an accusation of fraud brought forward by Hindenburg Research. Currently, Nikola is focused on its work with heavy trucks using GM’s fuel-cell system.

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