General Motors has abandoned plans to take a stake in Nikola, under a scaled-back arrangement that sent shares in the hydrogen start-up tumbling.
The non-binding agreement announced on Monday between the two companies downgrades the start-up from a technology and manufacturing partner to a customer of the carmaker’s hydrogen fuel cell system.
The news prompted Nikola’s shares to fall 21 per cent to $22.17.
Under the revised deal, Nikola has killed off plans for its Badger pick-up truck, a vehicle that drove the rise in its share price when they were unveiled over the summer. It means the company will have to reimburse millions of dollars in refundable customer deposits.
The group began collecting deposits of up to $5,000 for the vehicle in the summer, and had $6.9m in deposits that were “primarily related to the Badger” at the end of September, according to its most recent results.
An earlier deal in which GM would have taken a $2bn stake in the business and build Nikola’s pick-up truck on its behalf was torn up after the start-up was accused of an “intricate fraud” by a short-seller.
“This went from a game-changer deal for Nikola to a good supply partnership but nothing to write home about,” wrote Daniel Ives, an analyst at Wedbush. “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.”
The announcement comes the day before a big lock-up ends on Nikola’s shares, allowing investors to sell out of the company that floated through a reverse merger over the summer.
Mark Russell, Nikola’s chief executive, played down the importance of the Badger pick-up truck in an interview with the Financial Times in October.
“Heavy trucks remain our core business and we are 100 per cent focused on hitting our development milestones to bring clean hydrogen and battery-electric commercial trucks to market,” Mr Russell said on Monday.
Doug Parks, GM’s executive vice-president of global product development, purchasing and supply chain, said: “This supply agreement recognises our leading fuel cell technology expertise and development.”
Nikola and GM first announced a deal in early September where the Detroit carmaker would own a near 11 per cent stake of the company in exchange for manufacturing the Badger truck.
However, talks between Nikola and GM over terms of a deal had dragged on since short-seller Hindenburg Research released a report that included alleged misrepresentations by the Arizona-based company and its founder Trevor Milton.
The new agreement says the two companies will discuss what scope of services GM will provide to the truckmaker, and Nikola “would pay upfront for the capital investment for the capacity”.
Nikola could also potentially become a customer for GM’s Ultium batteries, as well as the Hydrotec fuel cell system.
The two companies have until the end of 2021 to agree final terms, under the memorandum of understanding.
Nikola expects to begin production of its first electric truck by the end of 2021 through a partnership with CNH’s Iveco brand.