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JPMorgan analyst 'skeptical' that Nikola's Badger pick-up truck initiative with GM will proceed

Ines Ferré
·Markets Reporter
·2 min read

Nikola (NKLA) shares sank as much as 16% earlier on Wednesday as JPMorgan analyst Paul Coster weighed in on the uncertainty surrounding Nikola and General Motors (GM) partnership which has yet to close next month.

Part of the $2 billion agreement announced in September involves GM’s manufacturing support for Nikola’s light duty electric truck called the Badger.

Since then though,“NKLA’s CEO has been consistently non-committal regarding the Badger initiative, in our view, and we are skeptical that it will proceed,” wrote Coster in a note to investors.

He believes the Badger could drain the company of cash needed for its large trucks initiative instead.

“We sense that both GM and Nikola have reason to renegotiate the deal,” wrote Coster.

Nikola Badger
Nikola Badger

“Nikola may want to drop the Badger partnership, GM may want more stock to compensate for the diminished scope,” he added.

Coster notes the Badger “is a potentially useful proxy in competing against incumbent OEMs in the pickup truck/commercial vehicle space.”

Coster has an Overweight rating on Nikola with a price target of $34.50.

The Nikola deal with GM is scheduled to close by December 3, otherwise either side could walk away. Both companies have been working on finessing terms of the agreement, which was originally slated to close on September 30.

On September 21, founder Trevor Milton stepped down as executive chairman days after the release of a short-seller report by Hindenburg Research. The short-seller laid out numerous accusations against Milton and the company. Both Nikola and its founder have denied those claims.

Overall on Wednesday several electric vehicle start-ups were down on including Chinese companies NIO (NIO), XPeng (XPEV), and Li Auto (LI).

The Chinese EV makers came under pressure following a report from Nikkei Asia over what investors see as more government scrutiny into nationwide EV projects. China has been offering subsidies to promote the use of electric vehicles in the country in order to combat pollution and move away from fossil fuel.

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Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre

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