By Tomi Kilgore, MarketWatch
Shares of Nikola Corp. rocketed higher Tuesday, after the battery- and hydrogen-electric vehicles maker disclosed a large equity investment by General Motors Co., as well as a “potential game changing” partnership to build the Nikola Badger pickup truck.
The Phoenix-based Nikola /zigman2/quotes/208704275/composite NKLA -0.27% said in a filing with the Securities and Exchange Commission that it entered into a subscription agreement last Thursday in which it will issue and sell 47.7 million shares of common stock to GM /zigman2/quotes/205226835/composite GM +0.54% , valued at $2.0 billion.
The value of the agreement was based on a stock price of $41.93, which was 16.1% above Thursday’s closing price of $36.13, but 16.2% below Tuesday’s closing price of $50.05. Nikola said the price per share was based on a volume-weighted average price over “a period of time” ending Sept. 2.
The stock soared 40.8% in very active trading, to the highest close since July 16. Trading volume ballooned to 133.2 million shares, enough to make the stock the third-most active on the Nasdaq exchange, according to FactSet, and well more than the full-day average of about 15.5 million shares.
“There have been many skeptics around Nikola and its founder Trevor Milton’s ambitions over the coming years, which now get thrown out the window with stalwart GM making a major strategic bet on Nikola for the next decade on the EV and fuel cell front.”
Wedbush analyst Dan Ives
GM said Tuesday that it will be subject to lockup provisions, in which there will be restrictions on share sales starting in one year and ending in June 2025.
“You couldn’t dream of a better partnership than this,” said Nikola Founder and Executive Chairman Trevor Milton. “By joining together, we get access to their validated parts for all of our programs, General Motors’ Ultium battery technology and a multibillion-dollar fuel cell program ready for production.”
Nikola had alluded to a deal last month when it reported second-quarter results, when the company said one of the milestones the company should be measured by is the announcement of an original equipment manufacturing (OEM) partner for the Badger by the end of 2020. Read more about Nikola’s Q2 results.
And as part of the agreement, GM will provide Nikola access to its parts and components, including its Ultium battery technology, and GM will engineer, sanction, validate and manufacture the battery-electric and fuel-cell versions of Nikola’s Nikola Badger truck.
GM will also be entitled to nominate one member for election to Nikola’s board of directors, who is “reasonably acceptable” to current board members.
“We are growing our presence in multiple high-volume EV segments while building scale to lower battery and fuel cell costs and increase profitability,” said GM Chief Executive Mary Barra. “In addition, applying General Motors’ electrified technology solutions to the heavy-duty class of commercial vehicles is another important step in fulfilling our vision of a zero-emissions future.”
Wedbush analyst Dan Ives said the partnership was a “potential game changing” deal for Nikola, as it could save the company more than $4 billion in battery and powertrain costs over the next decade, and more than $1 billion in engineering and validation costs.
“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,” Ives wrote in a note to clients. “There have been many skeptics around Nikola and its founder Trevor Milton’s ambitions over the coming years, which now get thrown out the window with stalwart GM making a major strategic bet on Nikola for the next decade on the EV and fuel cell front.”
See related : Nikola stock dips after report of CEO exaggerations.
Nikola’s stock has powered up 385.0% year to date, while the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.75% has gained 3.1%.
Nikola will remain responsible for the sales and marketing of the Badger, which is expected to make its public debut at Nikola World 2020 in Arizona, scheduled for Dec. 3 to Dec. 5. Badger production is expected to start in late 2022, at a location to be announced later.
In “celebration” of the GM partnership, Nikola said preorder reservations for the Badger are now available for $100.
Nikola’s stock surge helped provide a boost to the shares of fellow EV truck maker Workhorse Group Inc. /zigman2/quotes/207314632/composite WKHS -0.61% , which ran up 8.5% to a record close of $21.38.
Meanwhile, industry leader Tesla Inc.’s stock /zigman2/quotes/203558040/composite TSLA +3.02% plunged 21.1%, after S&P DJ Indices made changes to the benchmark S&P 500 index, and did not include Tesla, despite widespread speculation that it would be added.