Nikola Corp. (NASDAQ: NKLA) announced Monday that it has signed a new, nonbinding memorandum of understanding with General Motors Co. (NYSE: GM) that “supersedes and replaces” a strategic partnership agreement the two companies signed in September.
The new agreement eliminates GM’s 11% stake in the electric-fuel cell hybrid truck maker that did not involve any cash. The prior deal outlined an exchange of in-kind services and valued Nikola at more than $20 billion. The new deal was struck just days ahead of a December 3 deadline to reach an agreement.
That valuation has been cut in half following the release of a scathing short-seller report just two days after the GM-Nikola announcement. In addition to claiming that Nikola’s founder and then-CEO, Trevor Milton, lied about the company’s products, Hindenburg Research questioned Nikola’s claim of a revolutionary battery technology.
Under the terms of the understanding announced Monday, the two companies will work together “to integrate GM’s Hydrotec fuel-cell technology into Nikola’s Class 7 and Class 8 zero-emission semi-trucks for the medium- and long-haul trucking sectors.”
The new deal does not include any further development on Nikola’s Badger electric pickup truck. According to Nikola’s announcement, the Badger program “was dependent on an OEM partnership.” GM previously had agreed to manufacture the Badger. Nikola said it would refund all deposits from customers who had ordered a Badger truck.
Basically, the agreement announced Monday limits GM to a fuel-cell supplier role with Nikola for its heavy-duty trucks. GM said that it will engineer the fuel-cell system to already-agreed specifications and discuss with Nikola “the appropriate scope of services” GM will provide to integrate the system into Nikola’s vehicles. Taking no chances, GM said it expects “that the potential arrangement would be cost plus, and that Nikola would pay upfront for the capital investment for the capacity.”
So, Nikola now has a supplier that expects to be paid to develop the capacity to build fuel cells rather than a partner that would have provided fuel cell technology in exchange for manufacturing a now-defunct pickup truck.
Shares of Nikola traded at around $22.24, down about 21% shortly after Monday’s opening bell. The stock’s 52-week range is $10.27 to $93.99.
GM stock traded down about 0.1%, at $44.99 in a 52-week range of $14.33 to $46.71.
It’s not hard to figure out which side investors believe got the better side of the new arrangement.