What happened

Shares of embattled electric-truck start-up Nikola (NKLA 8.91%) were trading lower on Tuesday, after Reuters reported that the company's deal with General Motors (GM 0.74%) isn't yet finalized.

As of 11 a.m. EDT, Nikola's shares were down about 8.6% from Monday's closing price.

So what

When GM and Nikola first announced their agreement, under which GM will supply batteries and fuel cells to Nikola and put its Badger pickup truck into production, the two companies said that the deal would close by Sept. 30.

That date now appears to be in doubt. Reuters, citing a GM spokesperson, reported on Tuesday morning that GM has not yet closed its deal with Nikola and that discussions are continuing. 

A silver Nikola Badger pickup truck prototype

Will GM build Nikola's Badger pickup? The deal hasn't yet closed, raising concerns among investors. Image source: Nikola.

Recent revelations that Nikola's early prototype truck didn't work, and that the company's technology claims may have been exaggerated, have hammered the stock and called the company's future survival into question. Those (including me) who have argued that the company is likely to weather this storm have pointed to the GM deal as a key factor that will allow Nikola to move forward with its business plan.

Given what we know now, it's reasonable for auto investors to conclude that if GM backs out, Nikola will be in deep trouble. That was almost certainly a factor in the stock's decline on Tuesday.

Now what

Will GM back away? I think it's more likely that GM is holding out for more favorable terms. Specifically, the deal gives GM a $2 billion stake in Nikola at an agreed-on price of around $40 per share; with the stock now trading at less than half that price, I wouldn't be surprised if GM wants a better deal. 

One more thing to keep in mind: If the deal isn't concluded by Dec. 3, either side can terminate the agreement and walk away. Trade carefully.