Comment by ChuckMcM
4 years ago
The sad part for me is that this reads like a profile of a "successful, new age, startup entrepreneur" relying on the 'fake it till you make it' mantra betting other people's money on the outside chance they can figure out how to do what they claim they already do before everyone else catches on.
I would have expected that GM's due diligence team would uncover this sort of stuff prior to taking an 11% position in the company.
Which proves to me, once again, that the way to get rich is to defraud people with a lot of money, and not a lot of insight.
In fairness, GM got $2 billion worth of Nikolai stock for future vague work.
The work they are supposed to be doing for Nikolai is the same work they'll be doing for their own EV trucks (that they'll have to have at some point) so you can look at it as GM being paid by Nikolai for R&D.
I would still not do this deal if I was GM.
The probability of Nikolai bursting in the flames of disgrace and litigation before they'll pay GM for anything is 99%.
GM can only sell 30% of stock after a 1 year (and additional 30% each year after) so by the time they can cash in, it'll likely be worthless.
And Mary Barra will have to explain how she got taken by an obvious fraud. It might end up costing her a job.
> I would have expected that GM's due diligence team would uncover this sort of stuff prior to taking an 11% position in the company.
It's GM, so it wouldn't shock me. But as others have pointed out, the deal isn't quite as bad as it sounds.
> relying on the 'fake it till you make it' mantra betting other people's money on the outside chance they can figure out how to do what they claim they already do before everyone else catches on.
This really does seem like the de facto path to unicorn status. SoftBank and WeWork, Theranos. I would also throw in the soon-to-IPO Palantir and Snowflake. Both seem to be held in the air on pure hype on incredibly lackluster fundamentals. Uber is a decade old now and no one knows their end game. They seem to either be holding out for all taxi services to die off so they can start fleecing their customers, or on pie-in-the-sky hopes of a self-driving fleet of vehicles (owned and insured by who, I wonder?) I personally don't see anything "free market" about these obvious market manipulations via heavy subsidies. This sort of winner-take-all behavior will likely hurt consumers and choice in the long run.
But back to your main point, this is just the Minimum Viable Product nonsense taken to its logical extreme. How often have you seen the advice to just toss together a demo, fake website, or whatever and collect email addresses and/or get customers paying real money upfront for a product that is pure vaporware? It's the very first thing people tell you to do to verify a market. I have yet to see a startup that wasn't a little bullshit. Perception is reality today. That's what all these "fake it til you make it", "move fast, break things" type of people remind you, relentlessly.
GM likely knows this. They didn't buy 11% in the company. If you actually read the agreement its basically Nikola buys lots and lots and lots of stuff from GM and they pay part of that with that stock, but they also have to pay significantly in cash as well.
GM also would retain the right to all the fuel credits and those could be valuable.
If Nikola is successful, GM profits with a great deal. If its not GM doesn't actually lose much. only the time it engineers spent on cooperation with Nikola and potentially some tooling cost.