As December 3rd approached, investors waited with cautious optimism that the pending deal between Nikola (NASDAQ:NKLA) and General Motors (NYSE:GM) would be finalized. There were some hints that things were not proceeding as well as had hoped when Nikola CEO Mark Russell released cryptic messages about surviving with or without General Motors. On Monday, it was announced that GM would no longer be initiating its $2 billion stake in Nikola, instead, merely setting an agreement that the two companies would work together in a reduced capacity. The new deal also marks the end for Nikola’s Badger truck which sent its stock tumbling by over 26%.
The work agreement marks the end of a tumultuous path that saw Nikola lose its founder and CEO Trevor Milton after accusations of fraud and lying about its technology, led to Milton stepping down from his position. The report came just as General Motors was beginning to negotiate with Nikola, and in the end, it seems as though the Detroit-based automaker simply did not want to deal with the uncertainty that has surrounded Nikola on nearly every step of its journey.
It is difficult to imagine that just six months ago this stock was a Wall Street darling and hit all-time highs of $93.99 shortly after being listed as a publicly traded company. Shares are down nearly 80% since the highs in June, and at this point it is difficult to see any sort of meaningful recovery in its near future. The news of GM’s reluctance to commit to Nikola sent shockwaves throughout the industry as fellow electric truck-makers Workhorse Group (NASDAQ:WKHS) and Hyliion (NYSE:HYLN) both tumbled during Monday’s trading session.
It may not be all bad news for Nikola as J.P. Morgan analyst Paul Coster was quick to point out that the elimination of the Badger truck now allows Nikola to focus on its main objective: commercial trucks. The long-haul trucking industry is in dire need of some clean energy injection, and now both Nikola and GM can fully turn their attention to it. Industry leader Tesla ($170.29|5.03%) is set to unveil its Tesla Semi that is rumoured to be hitting roads in 2021, so Nikola has some work to do to stay relevant.
So what should investors take away from this? Normally a near 30% drop in a stock’s price presents a tremendous buying opportunity, but not all dips are created equal. It is difficult to recommend Nikola’s stock to any investor right now and all indications are that it should continue to get pummeled for the foreseeable future. This is just the latest in a long line of bad news for Nikola investors, and while certainly there could be long-term viability with the company, the reality is there are plenty of other companies in the electric vehicle sector where investors can put their money.
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