Nikola stock plunges as company cancels Badger pickup truck
December 1, 2020
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by admin


A large pickup truck gradually vanishes.
Enlarge / The front half of the Nikola Badger.

Things keep going downhill for aspiring hydrogen truck-maker Nikola.

Nikola’s stock plunged on Monday morning as the company announced that a previously announced deal with General Motors was not going to close. Instead, the two companies signed a “non-binding memorandum of understanding” related to the use of GM’s hydrogen fuel cell technology in Nikola’s future semi trucks. GM will not take a stake in Nikola as originally planned.

Nikola’s stock is down 26 percent as I write this on Monday morning. The stock is down 58 percent since September 8, the day Nikola originally announced the GM deal.

No more Badger

The news means that Nikola is canceling the Badger, a planned pickup truck that critics have long derided as vaporware. Under Nikola’s September deal with GM, GM was supposed to design and build the Badger on a cost-plus basis.

The deal would have enabled Nikola to sell a pickup truck it didn’t otherwise have the capacity to manufacture. But it was hard to see how Nikola was going to make a profit selling what would have essentially been a re-badged GM product.

Moreover, it wasn’t clear that Nikola had enough cash to finance the development of the Badger alongside the company’s semi trucks and a planned network of hydrogen fueling stations. With the hype around Nikola cooling, Nikola may not be able to raise the necessary cash from Wall Street.

The GM deal was negotiated under Nikola founder Trevor Milton. But Milton was forced to step down as Nikola’s executive chairman in mid-September. That was when news broke that Nikola’s first semi truck, the Nikola One, had never been functional—despite Milton’s claims to the contrary. A promotional video of the truck “in motion” actually featured the vehicle rolling down a long, shallow hill.

Since Milton’s departure, Nikola CEO Mark Russell has downplayed the Badger project. In October, he described the Badger as an “interesting and exciting project” but not part of Nikola’s “core business plan.” But while Russell downplayed the Badger, many of Nikola’s retail investors seemed to have their heart set on Nikola closing the GM deal. When confused investors mistook a month-old GM webpage for an announcement that the deal had closed earlier this month, Nikola’s stock soared 15 percent.

Now we know that the original GM deal—and the Badger truck—aren’t going to happen. Nikola says that it will refund customers who put down a deposit for the Badger.

It’s not clear whether the dissolution of the deal was driven more by Nikola or by GM. We argued in September that the deal was heavily tilted in GM’s favor, with Nikola putting up hundreds of millions of dollars to gain access to GM’s technology and know-how. GM wasn’t going to put any cash into Nikola.

However, a deal may have conferred some legitimacy on Nikola and risked reputational damage to GM if Nikola ultimately failed—especially after the Nikola One shenanigans came to light.

“Heavy trucks remain our core business and we are 100% focused on hitting our development milestones to bring clean hydrogen and battery-electric commercial trucks to market,” Russell said in a Monday press release.

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