Notes on the Market: GM Finally Backs Out of Nikola Deal

In what is pretty much a final stab in the now-old Nikola debacle, GM is officially backing out of a deal that would originally have given them an 11% stake in Nikola. Their new, watered down deal will include GM still supplying Nikola’s fuel cells. However, GM will no longer be engineering and building Nikola’s pickup truck, Badger, and will no longer be receiving an 11% stake.

Late in September, former CEO Trevor Milton resigned amid accusations of fraud. The full report, generated by short sellers Hindenburg Research, can be found here. Accusations include falsely claiming proprietary technologies such as fuel cells, and producing a video of a truck rolling down a hill to provide an illusion of a working prototype.

Nikola stock is down 64.97% since their high of $79.73 per share approximately six months ago. GM stock is up 24.06% in the same time period.

The watered-down deal is a win-win situation for GM. They would have a great supply partnership, but no equity stake. That means they can still profit off supplying fuel cells, but won’t take any risk in taking a stake in a fraudulent company. Nikola is currently being investigated by the Department of Justice and the SEC.