|Bid||0.00 x 1000|
|Ask||0.00 x 1200|
|Day's Range||20.16 - 23.00|
|52 Week Range||10.27 - 93.99|
|Beta (5Y Monthly)||N/A|
|PE Ratio (TTM)||N/A|
|Earnings Date||Nov. 09, 2020|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||30.33|
Nikola and GM revise the terms of their previous headline-grabbing deal.
(Bloomberg Opinion) -- If General Motors Co. doesn’t want to own a chunk of Nikola Corp., why should you? That’s the question after GM announced a much scaled-down partnership with the electric-vehicle upstart on Monday. The tie-up — initially announced in September — had been in flux amid allegations of deception at Nikola from a short-seller that the company has denied. That sparked a sharp recalibration of Nikola’s valuation and the subsequent departure of founder Trevor Milton as executive chairman, raising uncomfortable questions about whether GM really did its due diligence the first time around. The fact that there’s still any partnership with GM at all is a victory of sorts at this point for Nikola, but what remains is far from the endorsement it once was. Most notably, GM will no longer take the 11% holding in Nikola outlined in the original deal. In fact, it doesn’t appear the company will take any equity position at all. GM also won’t take on the job of producing and developing Nikola’s electric pickup dubbed the Badger. That program now appears to be kaput, with Nikola saying it will refund all customer deposits in the absence of a manufacturing partner. What GM will do is supply its Hydrotec fuel-cell system to Nikola’s commercial semi-trucks that are expected to begin production-engineered prototype testing by the end of 2021. Nikola is expected to pay upfront for the capital investment and GM will supply the technology “cost plus” — meaning Nikola will reimburse it for costs incurred as well as a specified profit. In short, this partnership is now little more than a traditional supplier contract. Gone is the highfalutin praise of Nikola as an industry-leading disruptor. In fact, GM CEO Mary Barra isn’t quoted at all in either company’s press release this go-around. Instead, Doug Parks, GM’s executive vice president of global product development, purchasing and supply chain, is featured in the company’s statement and talks only of its own technology. It’s a symbolic measure of just how significantly the partnership has been downgraded. Nikola shares dropped more than 20% in early trading. The commentary leading up to Monday’s announcement had seemed to indicate that, if anything, GM might take a bigger equity stake in Nikola to compensate for the drop in the company’s valuation and the potential for the work to be scaled back. JPMorgan Chase & Co. analyst Paul Coster had expressed skepticism last week that the Badger program would proceed, given a noncommittal attitude from Nikola CEO Mark Russell and the risk that the required investments would siphon cash away from more important semi-truck initiatives. Bloomberg reported in October that GM may seek a higher stake or demand warrants that would guarantee or even increase its level of ownership if Nikola raised more money.GM had plenty of leverage to renegotiate on whatever terms it wanted. It was never paying cash for the holding but rather receiving the shares in exchange for technology and services. In the end, the automaker seems to have decided an investment in Nikola just wasn’t worth the risk and that it would rather prefer the certainty of cash payments for its contributions.As I wrote in September when the transaction was first announced, the appeal of the transaction for GM seemed to be the opportunity to capture some of the buzz around Nikola and other electric-vehicle startups for itself and help the company get proper credit for its own technology investments. And as my colleague Chris Bryant wrote, neither Milton nor Barra were able to provide many convincing examples of innovations Nikola would contribute to the partnership; the company’s real strength appeared to be integrating innovations from others. The terms of the new agreement still allow GM to shine a spotlight on its fuel-cell technology, but the going rate for buzz these days just isn’t what it used to be — for both GM and those Nikola holders that are still stuck with their shares. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- The chief executive officer of Volkswagen AG, Herbert Diess, has predicted that within five to 10 years the world’s most valuable company will be a carmaker. Given how much investors have been bidding up the shares of Tesla Inc. and other electric vehicle stocks, it might happen sooner.Tesla’s market value soared past $540 billion this week — equivalent to 250 times its expected earnings this year — meaning it’s now the world’s 10th-most valuable listed business, according to Bloomberg data. A trio of New York-listed Chinese electric-vehicle groups — Nio Inc., XPeng Inc. and Li Auto Inc. — are worth a combined $154 billion. None of the three is profitable and together they delivered fewer than 30,000 vehicles during the most recent quarter, just over 1% of Volkswagen’s car sales volumes.Arrival Ltd., a U.K.-based electric-bus and van startup that’s poised to go public by merging with a special purpose acquisition company, is valued at almost $16 billion after the SPAC’s shares more than doubled in a week. It won’t start producing vehicles until late next year.(1)The electric revolution is real and the shift away from combustion engines is accelerating. From a climate perspective, it’s great that investors are allocating capital like this. Still, valuations look mighty bubbly. The potential for disappointment is massive, particularly for the newest crop of EV makers that are yet to generate meaningful revenue.Like all financial bubbles, this one is driven by dreams of enormous wealth. Elon Musk has overtaken Bill Gates as the world’s second-richest person. Scottish investment manager Baillie Gifford & Co., an early Musk backer, recently cashed out billions of dollars in Tesla stock but retains a 3.7% holding worth about $20 billion. Baillie Gifford has more than one horse in the EV race: Its Nio stake is worth almost $6 billion. The Chinese company’s U.S-listed shares have surged 1,235% this year. Nio’s recent history shows the perils of electric-vehicle stocks. It warned in March of substantial doubt in its ability to continue as a going concern, having burned through $4 billion of cash in three years. It survived thanks to a local government bailout. Tesla has been on the cusp of bankruptcy at least twice since 2003. Those now joining the electric race claim to have learned lessons from these near-death struggles but there’s little to suggest their fates will be any less volatile.Competition is intense and while electric motors are simpler to build than combustion engines, developing a vehicle that’s safe, reliable and exciting is incredibly difficult. Incumbent giants such as Volkswagen and General Motors Co. are much better capitalized and they’ve far more experience managing supply chains and building brands. After a slow start, they’ve gone “all-in” on EVs. They won’t be shoved aside easily. Several factors have driven electric-vehicle stocks to these giddy heights. The U.S. Federal Reserve has stoked a speculative frenzy by cutting interest rates to zero, and bored millennials trading stocks at home on Robinhood have caught the EV bug. Electric-vehicle companies know how to market themselves to this crowd: Workhorse Group Inc. says its delivery vans can be paired with a drone, while XPeng emphasizes its autonomous-driving capabilities. ElectraMeccanica Vehicles Corp.’s “Solo” model has just three wheels. Then there’s 2020’s hottest financial fad: SPACs. Many have merged with electric-vehicle groups, and one peculiarity of these deals is that the companies are allowed to publish detailed multi-year financial forecasts, unlike in a regular initial public offering. These projections are often extremely bullish. Like Arrival, Fisker Inc. — an asset-light electric-auto business whose shares have soared — is yet to commence commercial sales. Even Musk is worried about SPACs, though he hasn’t said which ones.These new companies claim to have a solution for the manufacturing difficulties and massive capital outlays that almost sank Tesla. Drawing a comparison with the way Apple Inc. outsources phone production to Foxconn Technology Group, Fisker plans to subcontract manufacturing of its Ocean SUV to Canadian auto-parts supplier Magna International Inc. Electric- and hydrogen-truck maker Nikola Corp. is pursuing a similar strategy with partners GM and CNH Industrial NV. Others are taking a different approach. Electric-pickup startup Lordstown Motors Corp. acquired a factory from GM and has licensed technology from Workhorse to speed its market entry. Not to be outdone, Arrival claims to have reinvented the car assembly line. It plans to construct smaller, cheaper “microfactories” situated closer to where products are sold. Greater automation will reduce the need for human labor, it says.However you produce vehicles, though, there’s plenty to trip you up. More than a third of Workhorse’s factory staff have had to down tools because of suspected coronavirus infections. Li Auto recalled all 10,000 electric SUVs produced before June, after it found a potential suspension problem. Workhorse and XPeng both warned recently of battery supply bottlenecks. A big test for wannabe Teslas will come when they’ve burned though their cash and need to ask equity and debt investors for more, as Tesla and Nio have done repeatedly. ElectraMeccanica warned in its latest accounts that its “ability to continue as a going concern will depend on our continued ability to raise capital on acceptable terms.”All of this may have short sellers licking their lips, but Tesla’s rise shows the danger of betting against the bubble. Nikola was the subject of a scathing report from Hindenburg Research that questioned its technology, and which forced the departure of its chairman. Yet its market capitalization now exceeds $11.5 billion.Diess may be right about carmakers becoming the most valuable companies. It’s inevitable, however, that some won't make it.(1) Basis of calculation: the transaction at $10 a share valued Arrival's equity at $6 billion. Shares of the CIIG Spac are now trading at $26.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.