Nikola founder Trevor Milton, whose company become a darling of the stock market over the summer, resigned as executive chairman on Monday following accusations by short-seller Hindenburg Research on Sept. 10 that he made false claims about Nikola's technology.
Milton has fought back, even after the U.S. Securities and Exchange Commission and the Department of Justice said they were looking into the company.
Nikola shares were down 20% in trading Monday, and have lost more than 45% of their value since Sept. 8, when it announced an alliance to build electric and fuel cell trucks with GM.
Nikola's alliance with GM, and earlier partnerships to develop fuel cell and electric commercial trucks with Bosch and CNH Industrial's Iveco unit are critical to the startup's effort to regain traction. On Monday, Nikola said board member Steve Girsky, a former GM vice chairman, would take over as chairman.
Last week, Girsky defended the due diligence his firm, VectoIQ, did before it purchased Nikola in a reverse merger that took the startup public.
GM has agreed to build an electric pickup for Nikola and supply batteries and hydrogen fuel cells for commercial trucks. In return, GM was supposed to receive an 11% stake in Nikola and payments of up to $700 million for assembling the Nikola Badger pickup.
"We will work with Nikola to close the transaction we announced nearly two weeks ago," GM spokesman Jim Cain said in a Monday email.
GM shares were down 6% Monday amid a broad market sell-off.
"GM put no money into this thing so I'm not sure why GM is selling off today," said Scott Schermerhorn, managing principal with Granite Investment Advisors. "I viewed the Nikola shares they were getting as a lottery ticket."
GM Chief Executive Mary Barra and company executives have stressed that the alliance with Nikola - which has acknowledged that a prototype truck shown moving in a 2017 video was not moving under its own power - made sense strategically.
"Given that GM is now trading below where it was when the deal was announced, we would view it as a positive if GM and Nikola can still make this partnership work, and effectively a non-event for GM shareholders if the deal falls through," said Tim Piechowski, portfolio manager with ACR Alpine Capital Research.
However, Hindenburg Research founder Nathan Anderson said in an email Monday that Milton's exit was "only the beginning of Nikola's unraveling."
"General Motors should carefully evaluate the potential long-term damage to its 112 year brand by continuing to tie itself to Nikola," Anderson wrote.
Italy's CNH Industrial declined to comment on Monday. CNH said last week it and Nikola were working to build prototypes of the startup's Tre seimi-truck, and CNH aimed to start testing the trucks later this year with hopes to begin selling them by the fourth quarter of 2021.
CNH invested $250 million in Nikola last September and owns about 7.11% of Nikola's shares.
Bosch, which has a stake in Nikola, declined to comment on Milton's exit, but said it will continue to work with Nikola. The company referred questions about the size of its Nikola stake to the startup.
"Bosch has been a supplier to Nikola for a number of years and invested in the company in its early financing rounds. We intend to continue working together with Nikola and remain in close contact with the company and its management," Bosch said in a statement.
By Ben Klayman