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Why Nikola Stock Is Charging Higher Today

By John Rosevear – Oct 21, 2020 at 12:24PM

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It's about what GM's president said.

What happened

Shares of electric-truck start-up Nikola (NKLA 9.49%) opened higher on Wednesday, after a General Motors (GM 4.03%) executive praised the company and said that partnership negotiations are still underway. 

As of 10:30 a.m. EDT, Nikola's shares were up about 9.4% from Tuesday's closing price.

So what

In an interview with CNBC on Wednesday morning, GM president Mark Reuss said that his company is continuing to "work the opportunity" of a partnership with Nikola. 

The two companies announced on Sept. 8 that GM would provide Nikola with batteries and fuel cells for its heavy trucks, and that it would engineer and build Nikola's Badger electric pickup, in exchange for a $2 billion stake. But Nikola's stock has since fallen by roughly half after a short-seller alleged that the company had misled investors, throwing the deal into question. 

A Nikola Tre, an electric Class 7 tractor-trailer truck, on the road

GM's president said that a deal with Nikola offers a great opportunity to bring the company's fuel cells, developed with Honda, to market in heavy trucks. Image source: Nikola.

Auto investors have seen the GM deal as key to Nikola's growth plan, particularly in the wake of the short-seller's allegations and the related departure of the company's founder, Trevor Milton. Reuss' comments raised hopes that a deal will be completed by GM's Dec. 3 deadline; that's why Nikola's stock opened higher today.

Now what

Reuss said that Nikola offers GM an excellent opportunity to put its fuel cells, developed in a joint venture with Honda Motor, into heavy Class 7 and Class 8 trucks. The deal would give the GM-Honda venture added scale and could provide extensive data once Nikola's trucks are on the road.

In a separate interview with Bloomberg, Reuss said that Nikola's Badger will have a different powertrain from the one that GM will use in its Hummer electric pickup, revealed by GM on Tuesday night. While the Badger is expected to combine batteries with a hydrogen fuel cell, the GMC Hummer EV will debut in the fall of 2021 with a 1,000 horsepower, three-motor battery-electric drive system, GM said on Tuesday.

John Rosevear owns shares of General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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