General Motors is standing by its pending deal to help Nikola Corp. build electric pickups in exchange for stock despite a leadership shake-up Monday at the Arizona-based electric vehicle maker.
In a news release, Nikola’s Board of Directors accepted what it called the voluntary resignation of Trevor Milton as chairman and CEO of Nikola. Nikola’s board said it accepted Milton’s proposal that Stephen Girsky replace him as the chairman, effective immediately.
Girsky is a former vice chairman of GM and a member of Nikola’s board. He is also the person to facilitate the deal that GM and Nikola have structured that is due to close in nine days. The leadership change follows a damaging report earlier this month accusing Nikola of “intricate fraud.”
“Even if it’s really voluntary like Milton says, it’s sinking the stock premarket Monday,” said David Whiston, auto analyst at Morningstar. “I could see the market thinking it’s not voluntary or thinking if there’s nothing wrong then why are you leaving. It’s possible GM lobbied for this too because they know Girsky, but that’s all speculation.”
Nikola’s stock in pre-trading was down 26.32%. GM’s stock slid 4.19% in pre-trading on the news.
J.P. Morgan Analyst Paul Coster said of Monday’s news that Girsky is, “probably better suited to the next – execution – phase of the company’s development, but Trevor Milton’s resignation could weigh on some of the partner and customer relationships he has forged, and employee morale is probably fragile right now, just as the workload is intensifying and competitive threat looms.”
On Sept. 10, Hindenburg Research published a 67-page report accusing Nikola of being an “intricate fraud.” Nikola has disputed the claim.
Now the U.S. Securities and Exchange Commission and Department of Justice are examining the allegations against Nikola. The news has crushed Nikola’s stock price and cast a shadow over its pending deal with GM.
GM declined to comment as to what role, if any, it had in Milton’s departure or if his leaving is tied to bad publicity surrounding Nikola. GM continued to stand by its decision to go forward with the pending partnership, which calls for GM to make Nikola’s Badger pickups, in exchange for about $2 billion worth of Nikola stock. The trucks are expected to hit the market by the end of 2022.
“We acknowledge Trevor Milton’s departure from Nikola and the decision of the Nikola Board to move forward,” Jim Cain, GM spokesman, said Monday. “We will work with Nikola to close the transaction we announced nearly two weeks ago to seize the growth opportunities in broader markets with our Hydrotec fuel cell and Ultium battery systems, and to engineer and build the Nikola Badger.”
More: If Nikola goes up in flames, GM might only get singed, analysts say
The message of support for Nikola in the wake of the report is consistent for GM. Last week, GM CEO Mary Barra told Wall Street, “Our company has worked with a lot of different partners and we’re a very capable team that has done the appropriate diligence.”
But the change in leadership likely won’t fix Nikola’s damaged reputation in the near term, said Karl Brauer, executive analyst for iSeeCars.com.
“There’s now a perception of Nikola misleading investors and business partners, and this perception has overshadowed the value Nikola brings to the GM partnership, at least in the near term,” Brauer said.
“The long-term benefits of alignment between GM and Nikola can still materialize, but until they do it’s a black eye for both companies.”
For his part, in a letter to employees, Milton said: “I made the decision to approach the Board of Directors and volunteer to step aside from my roles as executive chairman and a member of the Board of Directors. The focus should be on the company and its world-changing mission, not me. We have to keep our eye on the target and deliver without distractions.”
Milton said Girsky is the “right leader to guide our vision at the board level.”
In a U.S. Securities and Exchange Commission filing, Milton agreed to relinquish all of the 4,859,000 performance-based stock units granted to him Aug. 21 and “any right or cla…