Nikola Plunges After New GM Agreement Includes No Stake

Shares of Nikola (NKLA) are under pressure after the company and General Motors (GM) announced the signing of a non-binding Memorandum of Understanding, with the latter no longer taking an equity stake in the electric-truck maker. GM still intends to provide Nikola with fuel-cell technology but has scrapped plans to build an electric pickup truck named the Badger for the startup. Commenting on the news, Wedbush analyst Daniel Ives said he expects the new GM deal to be viewed "as a clear negative to the Street." More bullish on Nikola, his peer at JPMorgan believes the pullback could be a good buying opportunity.

REVISED GM DEAL: Nikola announced the signing of a non-binding Memorandum of Understanding with General Motors for a global supply agreement related to the integration of GM's Hydrotec fuel-cell system into Nikola's commercial semi-trucks. This supersedes and replaces the transaction announced on September 8, 2020. Under the terms of the MOU, Nikola and GM 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. As previously announced, Nikola expects to begin testing production-engineered prototypes of its hydrogen fuel-cell powered trucks by the end of 2021, with testing for the beta prototypes expected to begin in the first half of 2022. In addition, Nikola and GM will discuss the potential for the utilization of GM's versatile Ultium battery system in Nikola's Class 7 and Class 8 vehicles. The MOU does not include the previously contemplated GM equity stake in Nikola or development of the Nikola Badger. As previously announced, the Nikola Badger program was dependent on an OEM partnership. Nikola will refund all previously submitted order deposits for the Nikola Badger.

Nikola has also filed a prospectus supplement relating to the issuance of up to an aggregate of up to 23.89M shares of common stock. The prospectus supplement also relates to the offer and sale from time to time by the selling security holders of up to 53.39M shares of common stock. The filing occurred after Nikola's prior agreements with General Motors were terminated.

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