Nikola shares the crater by greater than 20% after GM deserted stake in a smaller, overhauled enterprise
Nikola shares fell more than 27% on Monday morning after General Motors announced it was abandoning its stake in the electric vehicle startup and the two said they would drop plans to build the Badger, Nikolas consumer pickup truck.
In September, automakers announced a $ 2 billion deal that gave GM an 11% stake in Nikola to supply battery and fuel cell technology and manufacture the Badger pickup.
The deal was initially viewed as a no-loss situation for GM, but the talks became entangled after short seller Hindenburg Research made fraud allegations against Nikola and its founder Trevor Milton, who stepped down as the company's CEO on Sept. 21.
Nikola shares initially rebounded on the pre-trading news on Monday before falling. As of 10:52 a.m., Nikola shares fell 26% to $ 20.78. GM stock fell 2.2% to $ 44.09 per share.
Wedbush analyst Dan Ives described the new deal as "a good delivery partnership" rather than a "game-changer deal" for Nikola.
"In short, GM's signing as a partner is a positive but ultimately not a stake in Nikola, and the billions of R&D that may be off the table now is a major negative blow to the Nikola story," he wrote in an Investor Notice Monday morning.
The companies said they are continuing to discuss GM, which Nikola may supply with battery systems for its planned electric tractor units.
Nikola said it would reimburse any previously filed contract payments for the badger, which was dependent on an outside partner like GM to build it.
The short seller's allegations were made public two days after the deal with GM was announced. They have led the Department of Justice and the Securities and Exchange Commission to investigate the company. Nikola has said that it is "fully cooperating" with the agencies.
The revised deal kicks off the already anticipated volatile week for Nikola stock. Aside from a Wednesday deadline for signing a deal with GM, insiders will be able to sell up to 166 million shares of the company's banned shares for the first time on Tuesday.
Much of that stock – 91.6 million – is held by Milton, who disappeared from the public and social media after his ousting as chairman in September. He resigned after the DOJ and SEC began investigating the fraud allegations.
Milton's holdings include 6 million shares of "founder options" given to early employees so that he has 85.6 million shares. There are around 360.9 million shares in the company outstanding, making Milton Nikola the largest single shareholder.
According to Nikola's third quarter SEC filing, a total of around 161 million shares of our common stock will be approved for sale as of Tuesday. Depending on the company's share price in November, another 5 million shares can be admitted for sale with immediate effect.