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Nikola shares slide after deal ends for electric garbage trucks with Republic Services

Key Points
  • Nikola and Republic Services have terminated a partnership to jointly develop electric garbage trucks.
  • Nikola said the decision was made after both companies determined it would "result in longer than expected development time and unexpected costs."

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Nikola Corporation rang the Nasdaq Closing Bell remotely from across the world.
Source: The Nasdaq

Nikola shares slid 9% Wednesday after the company announced that it has terminated its partnership with Republic Services to jointly develop electric garbage trucks.

Nikola said the decision was made after both companies "determined that the combination of the various new technologies and design concepts would result in longer than expected development time, and unexpected costs."

"This was the right decision for both companies given the resources and investments required," Nikola CEO Mark Russell said in a statement. "We support and respect Republic Services' commitment to achieving environmentally responsible, sustainable solutions for their customers."

When the deal for thousands of trucks was announced in August, Nikola's stock surged 22% to $44.81 a share. The shares are trading at about a third of that price now. Shares were trading at $15.33 Wednesday morning.

"In a nutshell, this is a 'gut punch' for investors that were hoping this monster order was a potential paradigm changer for Nikola and reference customer going forward," Wedbush analyst Dan Ives said in a note to investors Wednesday.

Republic Services confirmed the deal's termination and said it remains committed to electrification, citing continued collaborations with  Mack Trucks, Peterbilt Motors and a recent investment in California start-up Romeo Systems.

"We look forward to working with all of our OEM partners to capitalize on innovative new technologies, advance our fleet electrification goals and drive responsible growth and value creation, and are planning to make additional purchases from various suppliers in 2021," Republic said in a statement.

VIDEO8:2508:25
Nikola surges on Republic Services electric truck deal

The termination of the deal is the latest blow for Nikola, which was considered one of the hottest stocks on Wall Street earlier this year. The company's fall from grace has been as rapid as its rise.

After going public in June through a reverse merger with a special purpose acquisition company, shares skyrocketed as investors bet the company could be the next Tesla. The push was led by then-chairman and founder Trevor Milton, who was outspoken, charismatic and highly engaged in social media – much like Tesla CEO Elon Musk.

The hype drove shares to nearly $100 in June, pushing the company's market cap briefly above Ford Motor. The stock was always volatile, but its major downfall began in September.

Milton stepped down after the Department of Justice and Securities and Exchange Commission started investigating allegations of fraud raised by short-seller Hindenburg in September.

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Inside Nikola — the one-time Wall Street darling mired in controversy

Hindenburg accused Milton of making false statements about Nikola's technology in order to grow the company and partner with auto companies. The report, titled "Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America," was released two days after the company announced a deal with General Motors. It characterized Nikola as an "intricate fraud built on dozens of lies" by Milton.

At the time, Milton and the company disputed many of the claims, but admitted to one of Hindenburg's largest claims — that it staged a video showing a truck that appeared to be functional but wasn't, as well as claims that the truck was fully functional. 

GM last month backed out of its original $2 billion stock deal with Nikola that would have given the automaker an 11% stake in the company. Instead, agreeing to a nonbinding memorandum of understanding to supply fuel-cell technology to Nikola.