shocked the Street Tuesday announcing a partnership with
Shares of alternative fuel heavy-duty trucking pioneer are up more than 50% in midday trading and GM stock wasn’t doing too bad either.
Under the terms of the agreement, General Motors (ticker: GM) will engineer and build Nikola’s (NKLA) light-duty truck named Badger. GM will take an 11% stake in Nikola and have the right to nominate one person to the board of directors. The 11%, or roughly $2 billion, equity stake will be due from “in-kind” contributions. In-kind isn’t cash. The Badger is expected to enter production by year-end 2022. It’s a lot to digest.
GM stock is up 10.5%. Nikola stock move gives the startup a market capitalization of about $20 billion, up more than $6 billion from Friday’s closing price. GM’s market value, for comparison, is up about $4 billion on the news.
The $10 billion increase in market value is very close to the $9 billion in benefits outlined by both companies in the news release. Nikola expects to save $4 billion in manufacturing costs and $1 billion in engineering costs. GM expects to get $4 billion in benefits from manufacturing the Badger, among other factors.
“This strategic partnership with Nikola, an industry-leading disrupter, continues the broader deployment of General Motors’ all-new Ultium battery and Hydrotec fuel cell systems,” said GM CEO Mary Barra in the company’s news release. “We are growing our presence in multiple high-volume EV segments while building scale to lower battery and fuel cell costs and increase profitability.”
Nikola CEO Trevor Milton sounded very happy as well, “You couldn’t dream of a better partnership than this.”
For Nikola, the deal validates the Badger light-duty pickup truck as well as Nikola’s fuel cell heavy-duty trucking strategy. For GM, it gives the century-old auto maker another electric product to add to its lineup as well as a valuable equity stake in a startup company.
Since announcing plans to become a publicly traded entity in March, Nikola stock—which traded under an old ticker symbol—is up about 337%.
Write to Al Root at [email protected]