GM puts off electric-truck deal’s closing

DETROIT — General Motors has pushed back the closing date on its pending partnership with Nikola Corp., most likely to renegotiate the terms after Nikola’s stock price has plummeted.

The Phoenix electric-truck company faces allegations of fraud, but GM has said it intends to complete the deal with the company.

On Tuesday, GM issued a statement that read: “Our transaction with Nikola has not closed. We are continuing our discussions with Nikola and will provide further updates when appropriate or required.”

GM was tentatively set to close on a 10-year deal today. The deal would allow GM to share technology and parts with Nikola in exchange for stock and achieving other cost savings.

But the Sept. 30 closing date was always just an “anticipated” date, according to Nikola’s U.S. Securities and Exchange filing. The filing also said: “The subscription agreement may be terminated by either the company or GM Holdings if the closing has not occurred by December 3, 2020.”

Some analysts have questioned whether GM should do a deal, or at least renegotiate its original deal with Nikola, after a short seller’s report alleged Nikola had committed “intricate fraud” in the past.

Even before that report, Bloomberg had reported that when Nikola showed its Nikola One semitruck in 2016, Nikola falsely said that it was a working prototype even though it was nonrunning and missing essential parts.

To add to that, recent published reports say Nikola founder Trevor Milton, who resigned Sept. 21, is accused by two woman of sexually assaulting them when they were under the age of 18. He has denied both allegations.

“Given how far Nikola’s equity has fallen, Milton leaving, and a fraud investigation, I can’t imagine GM is fine with the original terms of the deal anymore and I suspect they are looking for a lot more Nikola equity,” Morningstar’s David Whiston said. “They may get it too because if GM walks away, then I believe that news would likely cause further mass selling off of Nikola’s stock.”

A GM spokesman declined to comment beyond the statement the company put out Tuesday and GM is providing no new target date for closure beyond the stated SEC filing that provides the Dec. 3 deadline.

Another industry observer agreed with Whiston.

“When GM originally negotiated the deal with Nikola it received stock worth $2 billion. Now, because of improprieties of Nikola’s ex-chairman, the value of that stock has dropped in half,” said John McElroy, host of Autoline.tv. “No doubt GM is renegotiating the deal to make up for that loss. Nikola will likely accede to GM’s demands because to lose it as a partner would be devastating for the startup.”

Nikola’s stock fell $1.42, or 7.4%, to close Tuesday at $17.88. That’s down from $37.57 on Sept. 10.

GM leaders have held steadfast to the partnership, announced Sept. 8, with Nikola. GM CEO Mary Barra told Wall Street that GM had done thorough due diligence on the company.

In the original deal, which former GM Vice Chairman Steve Girsky helped put together, GM would build the all-electric Nikola Badger heavy-duty pickup, scheduled to market at the end of 2022. Nikola will give GM $2 billion in stock and other cost benefits. GM has the right to nominate one board director at Nikola.

Then there is the key provision in it that allows GM to keep 80% of the electric-vehicle regulatory credits generated by the Badger pickup it will make for Nikola, once that pickup starts selling.

The other 20% of the credits will be transferred to Nikola, but GM has the right of first refusal to buy those at current market rates. The credit provisions are especially valuable as environmental regulations stiffen and not meeting them can result in big fines.

Girsky is filling in as chairman of Nikola in the wake of Milton’s resignation.

Now Girsky must quickly find a permanent chairman who has the trust of shareholders, McElroy said.

“He also needs to put a spotlight on Nikola’s CEO Mark Russell and his management team to show there is more to the company than Trevor Milton,” McElroy said. “Nikola also needs to publicly demonstrate its technology as GM did with its EV Day and Tesla did with its Battery Day. Nikola needs to prove to the public that it’s more than smoke and mirrors.”

GM has said it will bring at least 20 new electric vehicles to market by 2023. To make that happen in the most costeffective way GM is making many partnerships.