Nikola shares plummet on news of smaller deal with GM

General Motors is giving up its equity stake in Nikola Motors and scrapping plans to build the electric truck maker’s Badger pickup as part of a new, scaled-back deal between the companies.

Nikola shares plunged more than 20% on the news.

The new deal replaces an agreement announced in September in which GM had planned to take an 11% stake in Nikola and supply the startup with equipment for its highly anticipated hydrogen fuel cell trucks. GM had also previously said it would build Nikola’s pickup, the Badger.

But shortly after that deal was announced, a short seller released a report leveling allegations of fraud and exaggeration against the company and it’s then-chairman Trevor Milton. Nikola disputed the report.

In the wake of the allegations, GM reminded investors that it had not yet closed the deal with Nikola. The new arrangement, announced Monday morning, is still just a memorandum of understanding, not a final deal. Under this deal, GM will simply be a supplier to Nikola.

Nikola executives have said the Badger pickup would be built only through an arrangement with an outside company.

“Nikola is focusing on its core business of producing commercial zero-emission trucks,” a Nikola spokeswoman said in an email.