Guess which side wants to renegotiate.
It's amazing how fast major corporate deals can change when new allegations come to light. This is precisely the situation General Motors is now facing following the reveal of fraud allegations and subsequent resignation of Nikola founder and now ex-CEO Trevor Milton.
Earlier this month, Nikola appeared to be on top of the world when it announced a $2 billion, 10-year agreement with GM that would see the latter receive an 11 percent stake in Nikola and, among other things, would in turn engineer, homologate, and build the Nikola Badger electric and hydrogen fuel-cell pickup truck. GM was also adamant doing so would not interfere with plans to build the upcoming GMC Hummer EV truck. Things were looking good until a financial firm released a damning report alleging deception on Nikola's part, led mostly by Milton.
Upon its release, GM publicly said it planned to continue working with Nikola. However, the automaker wants to alter the terms of the deal just hours before it was originally supposed to be finalized. Reuters reports that negotiations between the two automakers are still happening.
"Our transaction with Nikola has not closed," GM spokeswoman Juli Huston-Rough said in a statement. "We are continuing our discussions with Nikola and will provide further updates when appropriate or required."
As of this writing, the September 30 closing date (today) may not happen. There is still time to make a deal, however. Nikola's filing with the Securities and Exchange Commission states both parties have until December 3, 2020 to work something out. If that date isn't met, either party can terminate the agreement.
Upon Milton's resignation last week, Nikola board member and ex-GM vice president Steve Girsky was promoted to the CEO's chair, and he's the one now charged with ironing out a deal with his former employer. Many industry analysts, including and, not surprisingly, the financial firm that revealed Nikola's alleged deceptions, have been urging GM to walk away from Nikola for several reasons, among them brand image.
Shares for both companies remain down by several percentage points, a fact GM can't take lightly. In any case, there's still time to strike a deal here, but the clock is ticking and GM has a choice to make.