Nikola tumbles after GM drops equity tie, plug-in pickup
Electric startup to concentrate on semi trucks
General Motors Co. has scrapped a tentative plan to take a stake in clean- energy trucking startup Nikola Corp. and jointly build an electric pickup truck, opting instead for a much narrower relationship between the two companies.
Under terms of a pact announced Monday, GM will allow Nikola to us e its hydrogen fuel- cell technology in planned semi trucks. The deal doesn’t include GM owning Nikola shares, a reversal from a proposed 11- per- cent equity stake outlined in September. The new arrangement also drops plans for GM to manufacture a battery-powered pickup for Nikola called the Badger.
The skinnier deal, in which GM will be one of two suppliers of hydrogen fuel cells for Nikola’s semi trucks, came after both companies re- evaluated their relationship following the ouster of the startup’s founder, Trevor Milton. Since then, GM has upped investment in its own electric trucks and Nikola’s new management began to see the Badger as a distraction from its mission to develop hydrogen- powered semis, said people familiar with the matter.
Shares of Nikola plunged nearly 27 per cent Monday, falling to US$ 20.41 in New York. GM’S stock fell 2.7 per cent to US$43.84.
The agreement comes ahead of a Dec. 3 deadline and ends months of speculation over GM’S commitment to the Phoenix- based company after a short seller report cast doubts on Nikola’s ability to deliver on promises and its transparency with investors. The allegations of deception hammered the once high- flying stock, prompted the resignation of Milton as chairman and forced GM to reconsider terms of the initial agreement.
“This went from a gamechanger deal for Nikola to a good supply partnership but nothing to write home about,” Dan Ives, a Wedbush Securities analyst, wrote in a research note. “No ownership/equity stake in Nikola and the billions of R&D potentially now off the table is a major negative blow to the Nikola story.”
Milton’s departure was the key moment that triggered a rethink of the original deal by both companies, said the people, who asked not to be named because the talks were private. Under former GM executive Steve Girsky as chairman and Mark Russell as chief executive officer, the startup decided to focus on the semi truck business and building a network of hydrogen filling stations.
Back in September, Milton had badly wanted to build the Badger and Nikola was willing to offer GM a more favourable deal in return for its promise to build the truck, these people said. But Nikola’s current management reckoned spending US$700 million to make the pickup, plus more cash to develop a retail sales network was too heavy a lift for the startup, they said.
GM also wanted to streamline its role. Since announcing the original agreement, GM has revealed plans to boost spending on electric vehicles and speed its own plug- in trucks to market. Nikola had very little work done on the Badger and GM was less interested in helping the company develop a truck from scratch, one of the people said.
The Detroit automaker also is far more interested in finding a way to get its fuel cells, which are jointly developed with partner Honda Motor Co., on the road than it is in working on a project like the Badger.
Nikola first publicly announced the Badger truck in February, with Milton claiming the truck had been in development for years and would come with in- house battery technology. Mark Russell, who replaced Milton as chief executive officer, later contested that idea. He told investors on an August earnings call it was “just a conceptual exercise.”