GM Drops Nikola Equity Stake and Badger Deal, Shares Plunge
Nikola Motors had a rough few months in what was supposed to be an exciting fall for the company – with delayed contract signings due to claims of fraud, and the ultimate stepping down of the company’s founder. And now, updates of the company’s contract with a major automaker have been shared.
In a bombshell announcement shared on Monday, General Motors (GM) announced it would be giving up its 20% equity stake in electric vehicle (EV) startup Nikola Motors, as well as all plans to produce and release the company’s anticipated Badger, a highly-anticipated electric truck, according to CNBC. After GM announced its plans, shares of Nikola plunged over 27% Monday morning, after an already downward-trending few months.
— Craig Lawrence (@clawrence) November 30, 2020
While the new deal is better than an alternative speculated by many – the potential for GM to drop the Nikola deal altogether – it’s considered a trade-off of a “gamechanger deal” by Nikola for a “good supply partnership,” as stated by Wedbush’s Daniel Ives.
In an investor’s note on Monday, Ives wrote, “In a nutshell, the signing of GM as a partner is a positive but ultimately 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.”
With investors able to sell Nikola’s stock starting Tuesday and a finalized GM deal expected by Wednesday, the rest of the week is sure to be a roller coaster for the EV startup. While the vast majority of shares are held by prior founder Trevor Milton (91.6 million shares, to be exact), up to 166 million shares will become eligible for sale – and with the company’s downward trend already underway, this week’s prognosis is not looking pretty.