GM won't take $2B stake in Nikola

GM has confirmed the company won't take an equity stake in electric truck maker Nikola. Yahoo Finance's Brian Sozzi shares the details.

Video Transcript

JULIE HYMAN: Shares of Nikola are down another 15% today. that's after falling yesterday on the news that GM would not in fact be taking a stake in the company. Brian Sozzi-- this one has been troubled for quite a while.

BRIAN SOZZI: Right, Julie. And if you're connecting the dots here right now, part of GM not taking a stake in Nikola-- that means Nikola won't be receiving $2 billion. And that is very, very important for a company that has never produced a profit, never produced a truck, and is burning through cash. Now keep in mind, we just talked to Nikola's new CEO, Mark Russell, on November 10th. And we asked him, will you have to raise capital? Keep in mind, this comes before-- or that came before-- the GM news. Take a listen.

MARK RUSSELL: So we have said in our investor materials for some time-- most of the year, actually-- that we would do one more capital raise, that would involve an equity raise. And that that would be sometime in the next 12-18 months time frame. And that we would do that opportunistically based on market conditions. So we stand by that. That's going to be our plan. We will plan to go back to the market for one more tranche of equity. And we'll do that when the conditions are best for that.

BRIAN SOZZI: And Julia, I just wrote about this more deeply on a piece that just hit on Yahoo Finance. Should be on the home page. But the bottom line is, Nikola ended the third quarter with $907 million in cash. It's building new $600 million manufacturing plants for its giant big huge electric trucks that cost money, also cost of money to build the trucks and address backlog that might be over 14,000 trucks from customers. You're going to need money to do that. What I think you're seeing for investors today is a concern out there on the street if they will have to move up on that timeline to raise capital. And of course, raising capital will be very penalizing to existing shareholders.

JULIE HYMAN: All right. The math does not look fantastic for Nikola here.