GM scraps plan to invest $2 bln in EV startup

GM has revised its plans to take a minority stake in EV startup Nikola, instead agreeing on a “supply partnership”.

CNBC’s Michael Wayland reported:

Shares of Nikola plunged during trading Monday after General Motors announced that it is giving up an equity stake in the electric truck start-up and the two said they are dropping plans to build the Badger, Nikola’s pickup truck for consumers.

The shares fell by 26.9% to close at $20.41 a share. The stock had been down by as much as 27.8% in a volatile day of trading. GM’s shares also fell, closing down by 2.7% to $43.84 a share.

Claudia Assis from MarketWatch wrote:

The agreement now amounts to “a good supply partnership” in fuel-cell technology, Wedbush analyst Dan Ives said, with no GM stake in the startup.

“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,” he said.

Ives kept the equivalent of a sell rating on Nikola stock and a $15 price target, implying a 25% downside from Monday’s prices. Hopes of a deal with GM had pushed Nikola shares about 30% higher in the last couple of weeks.

CNN’s Peter Valdes-Dapena noted:

Nikola executives have said the Badger pickup would be built only through an arrangement with an outside company. The company has now said it will refund deposits potential customers had placed for the truck.

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

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