NKLA Nikola Corporation

By Mike Colias 

General Motors Co. will no longer take an equity stake in electric-truck maker Nikola Corp. under a stripped-down agreement revealed Monday by the two companies.

GM still intends to provide Nikola with fuel-cell technology but the Detroit auto maker has scrapped plans to build an electric pickup truck named the Badger for the Phoenix-based startup -- a key part of an earlier agreement outlined in September.

That deal got delayed after a negative short seller's report raised questions about the readiness of some aspects of Nikola's business, allegations the company has said were false and misleading.

Nikola shares were down about 21% in Monday morning trading after releasing details about the nonbinding memorandum of understanding with GM. GM shares were off about 0.1%.

Under their original deal, GM was to take an 11% equity stake in the startup in exchange for supplying engineering work and other services. GM also was to engineer and build the electric pickup truck for retail customers, using the auto maker's proprietary technology for battery-powered vehicles.

Nikola revealed the revised deal with GM a day ahead of a closely watched lockup period expiring for some early investors who got shares as part of the startup's June listing. Starting Tuesday, those investors can start selling off approximately 161 million shares -- the majority of which are owned by founder and recently departed Executive Chairman Trevor Milton.

A spokesman for Mr. Milton didn't have an immediate comment.

Executives and board members recently extended the lockup for another 136.5 million shares through April, company filings show.

The GM partnership was considered a major win for Nikola, a relatively new transportation startup that had yet to make a single vehicle but was exciting Wall Street with plans to revolutionize the trucking industry.

In June, Nikola's market value briefly surpassed that of Ford Motor Co., after Mr. Milton tweeted that the company would begin taking reservations on the Badger pickup and show off a working truck by the end of 2020.

Nikola had committed to pay GM up to $700 million to develop and build the Badger in a deal valued at about $4 billion when it was announced Sept. 3, including the equity stake.

For GM, the deal with Nikola was also seen as a validation of the Detroit auto maker's technology in both hydrogen fuel cells and electric-vehicle technology. If the agreement outlined Monday comes to fruition, it would mark the first commercial use of GM's hydrogen fuel cells, a technology it began developing in the 1960s.

Nikola's shares jumped on the news of the GM partnership, but were slammed days later in the wake of the report from short seller Hindenburg Research, which claimed that Mr. Milton made exaggerated claims about Nikola's technology. Mr. Milton, who said he would defend himself against the report's allegations, stepped down later in September.

The fallout from the short seller's report also forced GM executives to field questions about whether they had done its homework on Nikola ahead of the deal. GM Chief Executive Mary Barra has said that GM conducted proper due diligence and that the companies had been introduced by Nikola Chairman Steve Girsky, a former GM executive.

Nikola executives have said that the Badger was backed mainly by Mr. Milton and that have been seeking to refocus the business on its commercial truck and hydrogen business since Mr. Milton's departure.

"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," Nikola CEO Mark Russell said.

The companies on Monday said they will explore the use of GM's electric-vehicle battery technology, called Ultium, in future commercial trucks.

Write to Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

November 30, 2020 10:11 ET (15:11 GMT)

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