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Nikola Corp. says it signed a new supply agreement with General Motors Co., which doesn’t include the previously announced GM equity stake. (Photo: Nikola Corp.)
The deal between Nikola Corp. and General Motors Co. went from “game changer” to “nothing to write home about” as Wall Street braced for another potential blow for Nikola this week.
Nikola NKLA, -24.32% stock fell more than 24%, on track for its lowest close in two weeks and its largest percentage decline since Sept. 23, when it fell 26%.
Earlier Monday, Nikola announced a scaled-back deal with GM GM, -2.12% that was a far cry from what had been hinted in September. The agreement now amounts to “a good supply partnership,” 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.
To add to investors’ worries about the company, some 130 million shares of Nikola, mostly owned by founder Trevor Milton, will unlock on Tuesday, more than doubling the current free float.
If Milton were to sell, it would create “meaningful technical pressure on the stock if he were to sell,” Deutsche Bank analyst Emmanuel Rosner said. Milton stepped down as board chairman in September.
“We could envision large selling on his behalf given the bulk of his wealth is tied up in NKLA shares, and that he is no longer affiliated with the company,” he said.
Nikola had announced the potential deal with GM in September, and earlier this month said the talks with GM were ongoing. The two companies had until Thursday to hammer out a final agreement. GM announced its own deeper push into EVs this month.
Gone is also the possibility that GM would be the maker of Nikola’s Badger pickup truck, which shuts down the project. Nikola said Monday it will refund order deposits.
Shares of Nikola have gained 107% this year, compared with gains around 12% for the S&P 500 index. SPX, -0.93%
