Nikola Pops As GM Makes Big Bet On Electric Truck Startup By Investors Business Daily
General Motors (GM) announced Tuesday that it is buying a stake in Nikola (NKLA) to help the electric car company build its own pickup truck to take on Tesla‘s (TSLA) Cybertruck. Nikola stock soared.
Under the terms of the deal, GM will receive an 11% stake in electric-vehicle manufacturer Nikola. GM will also engineer, validate and manufacture the battery-electric and fuel-cell versions of Nikola’s Badger electric truck.
Nikola will exchange $2 billion in newly issued stock for the in-kind services as well as for access to GM parts.
The transaction is set to close before the end of the month. The companies expect the Badger to enter production by year-end 2022.
“We are growing our presence in multiple high-volume EV segments while building scale to lower battery and fuel cell costs and increase profitability,” GM CEO Mary Barra said in a release.
Nikola started taking pre-orders for the Badger truck in June and has received 89,000 registrations of people expressing interest in the electric truck.
Wedbush analyst Dan Ives was bullish on the announcement in an investor note Tuesday.
“This news is a huge shot in the arm for Nikola and cements credibility not just for its Badger production slated to begin by the end of 2022 but for its hydrogen fuel cell ambitions and semi truck vision going forward,” he wrote.
Nikola Stock, GM Stock
Nikola stock shot up 40.8% to close at 50.05 on the stock market today. Shares are back above their 50-day line for the first time since July, but remain almost 50% below all-time highs reached in June, according to MarketSmith chart analysis. GM stock jumped 7.9%. Tesla tumbled 21% after the stock wasn’t added to the S&P 500 as hoped on Friday.
Nikola stock first came public in June after a merger with a blank check company. Billionaire Trevor Milton founded Nikola in 2014 and is now the chairman.
In August, Nikola CEO Mark Russell told analysts that there would be an announcement for a Badger electric pickup truck manufacturing partner by the end of 2020 and a significant commercial agreement on fuel cells.
Milton said later that month he would like to cooperate with Hyundai. But his two proposals to Hyundai were rejected.
In August, Nikola said launch partner Anheuser Busch (BUD) will get prototypes before the end of 2021, with mass production not starting until 2023. The truck will make its public debut Dec. 3 at Nikola World 2020 in Arizona.
The Badger will compete against Tesla’s Cybertruck. But it won’t look anything like it.
“A lot of people don’t like the design, including me. I think it looks like a doorstop,” Russell said earlier this year.
GM’s Other Electric Car Options
Ahead of the Nikola announcement, Wall Street had been hyping up a potential spinoff of GM’s electric car business.
A GM EV spinoff could be worth at least $15 billion-$20 billion and perhaps as much as $100 billion, Deutsche Bank analysts have estimated. In a recent earnings call, CEO Barra said no options are off the table for the electric car unit.
GM has also invested in other EV startups. Electric truck company Lordstown Motors is merging with blank check firm DiamondPeak (DPHC) and trade on the Nasdaq under the ticker RIDE.
The deal included a $500 million private investment in public equity, with GM investing $75 million. Last November, Lordstown purchased GM’s Lordstown assembly plant, a 6.2 million square foot facility capable of producing 600,000 electric vehicles annually. In June, Lordstown unveiled a prototype Endurance pickup truck.
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