Nikola Corporation rang the Nasdaq Closing Bell remotely from across the world.
Source: The Nasdaq
Nikola shares slid by as much as 12% in premarket trading Wednesday after announcing that it’s terminated its partnership with Republic Services to jointly develop electric garbage trucks.
Nikola said the decision was made after both companies “determined that the combination of the various new technologies and design concepts would result in longer than expected development time, and unexpected costs.”
“This was the right decision for both companies given the resources and investments required,” Nikola CEO Mark Russell said in a statement. “We support and respect Republic Services’ commitment to achieving environmentally responsible, sustainable solutions for their customers.”
When the deal for thousands of trucks was originally announced in August, Nikola’s stock surged 22% to $44.81 a share. The shares are trading at about a third of that price now. Shares opened 7.6% lower Wednesday at $15.55.
“In a nutshell, this is a ‘gut punch’ for investors that were hoping this monster order was a potential paradigm changer for Nikola and reference customer going forward,” Wedbush analyst Dan Ives said in a note to investors Wednesday.
Republic Services did not immediately respond for comment.
The termination of the deal is the latest blow for Nikola, which was considered one of the hottest stocks on Wall Street earlier this year. The company’s fall from grace has been as rapid as its rise.
After going public in June through a reverse merger with a special purpose acquisition company, or SPAC, shares skyrocketed as investors bet the company could be the next Tesla. The push was led by then-chairman and founder Trevor Milton, who was outspoken, charismatic and highly engaged in social media – much like Tesla CEO Elon Musk.
The hype for the pre-revenue company drove shares to nearly $100 in June, pushing the company’s market cap briefly above Ford Motor. The stock was always volatile, but its major downfall began in September.
Milton stepped down after the Department of Justice and Securities and Exchange Commission started investigating allegations of fraud raised by short-seller Hindenburg in September.
Hindenburg accused Milton of making false statements about Nikola’s technology in order to grow the company and partner with auto companies. The report, titled “Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America,” was released two days after the company announced a deal with General Motors. It characterized Nikola as an “intricate fraud built on dozens of lies” by Milton.
At the time, Milton and the company disputed many of the claims, but admitted to one of Hindenburg’s largest claims — that it staged a video showing a truck that appeared to be functional but wasn’t, as well as claims that the truck was fully functional.
GM last month backed out of its original $2 billion stock deal with Nikola that would have given the automaker an 11% stake in the company. Instead, agreeing to a non-binding memorandum of understanding to supply fuel cell technology to Nikola.
