Nikola (NKLA) Shares Down 9% in Pre-market Due to Uncertainties on $2B Deal with GM

UTC by John K. Kumi · 3 min read
Nikola (NKLA) Shares Down 9% in Pre-market Due to Uncertainties on $2B Deal with GM
Photo: Nikola Corp

Nikola investors are looking forward to the partnership deal with General Motors as it may cause a positive reflection on the company’s shares.

There have been a lot of speculations surrounding Nikola Corporation (NASDAQ: NKLA) partnership deals and uncertainties on the shares of the ousted founder in recent days. According to data, Nikola shares experienced a negative response in demand causing it to fall by more than 8% in the pre-market. At the time of writing, the stock was trading at $31.50 (-8.70%). However, yesterday, NKLA shares were in green, trading at $34.50 with a 17.31% rise.

This consistent pullback is contrary to the expected direction of price movement following its impressive truck designs and features earning it the nickname “the Tesla of Trucking”. The electric car startup has refused to clarify speculations and to assure investors on what will happen to the shares of the largest shareholder after the CEO Mark Russell kept them in the dark in a recent statement.

What Events Can Have Impact on Nikola (NKLA) Shares

Investors are very much looking forward to the said partnership deal with General Motors Company (NYSE: GM) as it may cause a positive reflection on its shares. The deal is said to be worth $2 billion and will be done in exchange for an 11% equity stake. The deal will see General Motors supplying Nikola with fuel cell and battery technology. Also, Nikola would be supplied with all-electric pickups and as well be able to reduce cost by $5 billion in the next 10 years when the deal falls through. 

Russell in his statement said he would not comment further than that. However, hinted that an agreement has not been reached as he stated that either side would walk away if no conclusion is made on the deal by Dec 3. Also, he revealed that the deal is still ongoing. Without any assurance that everything will go through, investors might have played safe by being reluctant with their investment, causing the drop in the share price. 

On the other hand, the stepped-down founder of the start-up, Trevor Milton who happens to be the largest shareholder has an option to either sell his shares or retain them. Currently, no announcement has been made on the decision, putting investors in a state of confusion. Milton had 91.6 million shares with 6 million of the total shares in “founder option” dispatched among the early employees. Interestingly, the company stock outstanding is 360.9 million shares which makes Milton a decisive figure in the share prices. Russel in his recent statement refused to comment on the decision of Milton In regards to what he plans on doing with his stake. 

Milton owned a separate company called T&M Residual and had 39.8 million shares in Nikola. Short-seller Hindenburg accused Milton of fraud causing the Department of Justice and Securities and Exchange Commission to investigate him.

Milton was accused of using false statements to get partnership deals with auto companies and to grow through fraud. A report published soon after Nikola came public in its partnership conversation with General Motors labeled the company as an “intricate fraud built on dozens of lies.”

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