Published on September 8th, 2020 📆 | 1971 Views ⚑
0our $2 billion deal with Nikola ‘validates’ our electric vehicle technology
With one headline grabbing deal with buzzy electric truck startup Nikola, GM Chairman and CEO Mary Barra has probably finally earned a key element among the Wall Street community.
Much deserved respect for a cutting-edge electric vehicle platform.
Nikola (NKLA) announced Tuesday it has selected GM (GM) to be its manufacturing parter for its electric pickup truck dubbed the Badger. The Badger will use GMâs widely acclaimed Ultium battery technology. Additionally, Nikola will hand over $2 billion in stock to GM â giving the automaker an 11% stake in the company. An added wrinkle that is no less important: GMâs battery and hydrogen fuel cell technology will be used in Nikolaâs commercial trucks.
Shares of Nikola and GM rose 40% and 8%, respectively, on the tie-up.
âWe see this as an incredibly important day because it's a validation of our technology, both our battery electric technology as well as our fuel cell technology,â Barra told Yahoo Financeâs The First Trade.
Up until now, the argument could be made the Street didnât want to give GM any validation on its electric vehicle technology. Despite the strong performance metrics of GMâs Ultium technology and plans to release 20-plus new EVs by 2023, GMâs stock has dropped about 16% this past year. Thatâs in the face of the meteoric rise in Teslaâs stock (up 683%) and a well-received public market debut this summer of Nikola.
GMâs market cap prior to the deal with Nikola stood in the low $40 billion area whereas Teslaâs has climbed to $332 billion.
That valuation disconnect has led to some on Wall Street â namely analysts at Deutsche Bank âto clamor for Barra to spin off the electric vehicle business. Deutsche Bank estimated recently GMâs EV business could be worth in the $15 billion to $100 billion range. Barra fanned that speculation a bit on the companyâs second quarter earnings call, telling analysts everything is âon the tableâ to drive shareholder value.
Barra remained open-minded in the interview with Yahoo Finance.
âWell, we're focused on creating long-term value. And I've always said that that's our focus. And we're going to do what's right for our shareholders,â Barra said. âSo we think this [deal with Nikola] is just the beginning of unlocking the value that's within the company. Also the capability we have to engineer to have scale, especially as we look at electric vehicles in China as well as North America and just to continue to build and be able to demonstrate that we are going to be a very strong player in the electric vehicle future.â
Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn." data-reactid="41">Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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