Nikola shares tumble on news of smaller deal with GM

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Nikola shares plunged more than 20% on the news.

The new deal replaces a deal announced in September in which GM planned to take an 11% stake in Nikola and supply the start-up with equipment for its much-anticipated hydrogen fuel cell trucks.. GM had also previously said it would build Nikola’s planned pickup, the Badger.
General Motors will not build Nikola's Badger truck.
But shortly after the deal was announced, a short seller released a report that brought up allegations of fraud and exaggeration against the company and its then chairman, Trevor Milton. Nikola disputed the report.

Following the allegations, GM reminded investors that it has yet to make the deal with Nikola. The new arrangement, announced Monday morning, is still only a memorandum of understanding, not a final deal. Under this agreement, GM will simply be a supplier to Nikola.

Nikola executives said the Badger pickup would only be built through a deal with an outside company. The company has now announced that it will reimburse deposits that potential customers have placed for the truck.

“Nikola is focused on its core business of producing zero emission commercial trucks,” a Nikola spokeswoman said in an email.

The two companies will also discuss Nikola possibly using GM’s Ultium battery system, which will be used in future GM electric vehicles.

“It went from a game-changing deal for Nikola to a good sourcing partnership, but nothing fancy,” wrote analysts Daniel Ives and Strecker Backe at Wedbush Securities.

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