Nikola shares fell more than 20% in premarket trading on Monday after General Motors announced it was abandoning its stake in the electric vehicle startup and the two said they had plans to build the Badger, Nikolas Pickup for consumers , drop .
In September, automakers announced a $ 2 billion deal that gave GM an 11% stake in Nikola to supply battery and fuel cell technology and manufacture the Badger pickup.
The deal was initially viewed as a no-loss situation for GM, but the talks became entangled after short seller Hindenburg Research made fraud allegations against Nikola and its founder Trevor Milton, who stepped down as the company's CEO on Sept. 21.
Nikola shares initially rallied on the news before breaking pre-market trading. GM stock was down less than 1%.
Wedbush analyst Dan Ives described the new deal as "a good delivery partnership" rather than a "game-changer deal" for Nikola.
"In short, GM's signing as a partner is a positive but ultimately not a stake in Nikola, and the billions of R&D that may be off the table now is a major negative blow to the Nikola story," he wrote in an Investor Notice Monday morning.
The companies said they are continuing to discuss GM, which Nikola may supply with battery systems for its planned electric tractor units.
Nikola said it would reimburse any previously filed contract payments for the badger, which was dependent on an outside partner like GM to build it.
The short seller's allegations were made public two days after the deal with GM was announced. They have led the Department of Justice and the Securities and Exchange Commission to investigate the company. Nikola has said that it is "fully cooperating" with the agencies.