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How does a huge corporation like GM end up partnering with such an obvious scam, especially post-Theranos? Where is the due-diligence? I saw NKLA stock skyrocke

How does a huge corporation like GM end up partnering with such an obvious scam, especially post-Theranos? Where is the due-diligence? I saw NKLA stock skyrocketing, and spent 5 minutes researching the company to find out why, and all I found were massive red flags... how did GM miss them?

carriganisms 6y ago
If you read to the end of the article it addresses the GM deal. GM will use its own battery tech. Nikola is basically just sales/marketing. The deal still makes absolutely no sense, but GM isn't dependent on Nikola having working tech or not.
- jfim 6y ago
  It might actually make sense for GM. GM is building the vehicles using their own tech/plants (presumably not at a loss) and for doing so, is getting Nikola stock. If Nikola is an unexpected success, then they have a significant stake in it, and if they fail, then hopefully they don't have too many vehicles that Nikola hasn't paid for.
- HuShifang 6y ago
  It wouldn't be the first time GM used a "sock puppet" (loosely defined) to escape its own reputation. [0] [0]: https://en.m.wikipedia.org/wiki/Saturn_Corporation https://en.m.wikipedia.org/wiki/Saturn_Corporation
  - deleted 6y ago
    [deleted]
- perardi 6y ago
  It's baffling. Like you said, GM will use its own technology. So they bought 11% of Nikola for…edgy CEO shitposting on Twitter? GM can definitely build a good electric vehicle. They cannot seem to market a good electric vehicle—see Chevrolet Bolt sales, and then ask a random person if they know what a Bolt is. So the Nikola investment is the equivalent of buying a hip design studio?
  - stu2b50 6y ago
    They didn't buy any stock. GM gets 11% in return for supplying and R&D for the Nikola "car". But they didn't spend any cash, and in fact get cash because they can reimburse 700M. In the worst case, they were paid to do their own R&D. Nikola basically bribed GM with a insane deal so they can say they have a GM partnership.
  - foobarian 6y ago
    Even better, remember the EV1? https://en.wikipedia.org/wiki/General_Motors_EV1 https://en.wikipedia.org/wiki/General_Motors_EV1
  - tyingq 6y ago
    Nikola did have a pleasing exterior design for the pickup and a solid email list of potential buyers. Not worth a fortune, but something.
gibolt 6y ago
GM only stood to benefit, with the exception of tarnishing their brand and trust even more.
mafuyu 6y ago
It was such a good deal for GM that it didn't matter. They got 11% of Nikola, which they can start selling off after a year. And that was just to allow Nikola access to their IP, which GM wanted to develop and test anyways. I imagine they got such great terms because Nikola has absolutely nothing working in-house.
- toomuchtodo 6y ago
  11% of 0 is 0. This simply solidifies the idea that GM is led by out of touch legacy management. "We were supposed to check they only rolled the truck down a hill?" Say what you will about Musk and Tesla (I know, I know), but their Class 8 Semi did a nationwide tour (under its own power) to potential customers [1] and also occasionally pitches in to perform vehicle deliveries [2], no downhill coasting required. [1] https://electrek.co/2018/08/25/tesla-semi-drove-across-country-supercharger-elon-musk/ https://electrek.co/2018/08/25/tesla-semi-drove-across-count... [2] https://electrek.co/2020/06/26/tesla-semi-spotted-used-deliver-vehicles-end-of-quarter-push/ https://electrek.co/2020/06/26/tesla-semi-spotted-used-deliv...
  - xeromal 6y ago
    Not really. They can probably sell it at a loss and recover it all back in tax breaks.
    - deleted 6y ago
      [deleted]
  - 112012123 6y ago
    In addition to the 11%, GM is also slated to earn up to 700 million dollars in cash.
    - yholio 6y ago
      More specifically was slated to earn 700 million, if the Nikola ponzi had been able to slip under the radar and continue. I'm absolutely sure NKLA does not have 0.7 billion lying around in cash, those are new investment that they need to raise. Fake it till you make it, they say. In the current situation, all investors will require substantial proof of working technology. No working tech, no new investment, the company will probably fold before paying back a cent to GM.
bob33212 6y ago
It was a PR move. All major business websites had a story about the news. They would have preferred that this didn't come out and NKLA was able to create a real company, but it isn't like they shut down all their factories in anticipation of NKLA making all the GM cars.
JumpCrisscross 6y ago
Did GM pay Nikola cash for its investment? Or is it offsets against e.g. purchases of GM batteries?
- stu2b50 6y ago
  The latter. Hence it's basically zero risk for GM. If Nikola is real, then the deal is good. If Nikola is a fraud, then it's not like GM wasn't going to do R&D on battery tech anyway.
Tade0 6y ago
Wouldn't be their first time. Previously it was Envia Systems promising a 400Wh/kg battery years before this was on anyone's roadmap. Of course it turned out to be a scam.
schwinn140 6y ago
The same way countless business, government, and philanthropic leaders were all duped by Theranos. Group think and greed are powerful drugs for those unable to perform their own critical thinking/research.
an_opabinia 6y ago
Nikola, essentially, paid someone at GM in exchange for the deal.
MiroF 6y ago
This sort of thing is (from my limited experience) incredibly common in the start up space.
deleted 6y ago
[deleted]
samfisher83 6y ago
Walgreens, Safeway, and cleveland clinic partnered with Theranos. Cleveland Clinic is supposed to be one of the best hospitals in the world.
- yhoneycomb 6y ago
  The Cleveland Clinic is only the "best" because of marketing. Think about it. Are the best and brightest REALLY clamoring live indefinitely Cleveland? Yeah right. The best hospitals are likely in California. Doctors want to work in California so bad that they actually take LESS money. It's called the sunshine tax.

carriganisms 6y ago

If you read to the end of the article it addresses the GM deal. GM will use its own battery tech. Nikola is basically just sales/marketing. The deal still makes absolutely no sense, but GM isn't dependent on Nikola having working tech or not.

jfim 6y ago
It might actually make sense for GM. GM is building the vehicles using their own tech/plants (presumably not at a loss) and for doing so, is getting Nikola stock. If Nikola is an unexpected success, then they have a significant stake in it, and if they fail, then hopefully they don't have too many vehicles that Nikola hasn't paid for.
HuShifang 6y ago
It wouldn't be the first time GM used a "sock puppet" (loosely defined) to escape its own reputation. [0] [0]: https://en.m.wikipedia.org/wiki/Saturn_Corporation https://en.m.wikipedia.org/wiki/Saturn_Corporation
- deleted 6y ago
  [deleted]
perardi 6y ago
It's baffling. Like you said, GM will use its own technology. So they bought 11% of Nikola for…edgy CEO shitposting on Twitter? GM can definitely build a good electric vehicle. They cannot seem to market a good electric vehicle—see Chevrolet Bolt sales, and then ask a random person if they know what a Bolt is. So the Nikola investment is the equivalent of buying a hip design studio?
- stu2b50 6y ago
  They didn't buy any stock. GM gets 11% in return for supplying and R&D for the Nikola "car". But they didn't spend any cash, and in fact get cash because they can reimburse 700M. In the worst case, they were paid to do their own R&D. Nikola basically bribed GM with a insane deal so they can say they have a GM partnership.
- foobarian 6y ago
  Even better, remember the EV1? https://en.wikipedia.org/wiki/General_Motors_EV1 https://en.wikipedia.org/wiki/General_Motors_EV1
- tyingq 6y ago
  Nikola did have a pleasing exterior design for the pickup and a solid email list of potential buyers. Not worth a fortune, but something.

gibolt 6y ago

GM only stood to benefit, with the exception of tarnishing their brand and trust even more.

mafuyu 6y ago

It was such a good deal for GM that it didn't matter. They got 11% of Nikola, which they can start selling off after a year. And that was just to allow Nikola access to their IP, which GM wanted to develop and test anyways. I imagine they got such great terms because Nikola has absolutely nothing working in-house.

toomuchtodo 6y ago
11% of 0 is 0. This simply solidifies the idea that GM is led by out of touch legacy management. "We were supposed to check they only rolled the truck down a hill?" Say what you will about Musk and Tesla (I know, I know), but their Class 8 Semi did a nationwide tour (under its own power) to potential customers [1] and also occasionally pitches in to perform vehicle deliveries [2], no downhill coasting required. [1] https://electrek.co/2018/08/25/tesla-semi-drove-across-country-supercharger-elon-musk/ https://electrek.co/2018/08/25/tesla-semi-drove-across-count... [2] https://electrek.co/2020/06/26/tesla-semi-spotted-used-deliver-vehicles-end-of-quarter-push/ https://electrek.co/2020/06/26/tesla-semi-spotted-used-deliv...
- xeromal 6y ago
  Not really. They can probably sell it at a loss and recover it all back in tax breaks.
  - deleted 6y ago
    [deleted]
- 112012123 6y ago
  In addition to the 11%, GM is also slated to earn up to 700 million dollars in cash.
  - yholio 6y ago
    More specifically was slated to earn 700 million, if the Nikola ponzi had been able to slip under the radar and continue. I'm absolutely sure NKLA does not have 0.7 billion lying around in cash, those are new investment that they need to raise. Fake it till you make it, they say. In the current situation, all investors will require substantial proof of working technology. No working tech, no new investment, the company will probably fold before paying back a cent to GM.

bob33212 6y ago

It was a PR move. All major business websites had a story about the news. They would have preferred that this didn't come out and NKLA was able to create a real company, but it isn't like they shut down all their factories in anticipation of NKLA making all the GM cars.

JumpCrisscross 6y ago

Did GM pay Nikola cash for its investment? Or is it offsets against e.g. purchases of GM batteries?

stu2b50 6y ago
The latter. Hence it's basically zero risk for GM. If Nikola is real, then the deal is good. If Nikola is a fraud, then it's not like GM wasn't going to do R&D on battery tech anyway.

Tade0 6y ago

Wouldn't be their first time. Previously it was Envia Systems promising a 400Wh/kg battery years before this was on anyone's roadmap. Of course it turned out to be a scam.

schwinn140 6y ago

The same way countless business, government, and philanthropic leaders were all duped by Theranos. Group think and greed are powerful drugs for those unable to perform their own critical thinking/research.

an_opabinia 6y ago

Nikola, essentially, paid someone at GM in exchange for the deal.

MiroF 6y ago

This sort of thing is (from my limited experience) incredibly common in the start up space.

deleted 6y ago

[deleted]

samfisher83 6y ago

Walgreens, Safeway, and cleveland clinic partnered with Theranos. Cleveland Clinic is supposed to be one of the best hospitals in the world.

yhoneycomb 6y ago
The Cleveland Clinic is only the "best" because of marketing. Think about it. Are the best and brightest REALLY clamoring live indefinitely Cleveland? Yeah right. The best hospitals are likely in California. Doctors want to work in California so bad that they actually take LESS money. It's called the sunshine tax.