Nikola Motors' share prices fell more than 25% Monday after General Motors announced it would be scrapping its plans of building the company's Barger electric pickup.
GM added that it will also be canceling its plans of acquiring an equity stake in Nikola.
Nikola's shares dropped from a Friday close of $27.93 per share to a Monday opening of $22.11 per share. The stock dropped further during the trading day and closed at $20.41 per share.
GM initially said in September that it plans to acquire an 11% stake in Nikola. It also reached a deal with Nikola to supply it with equipment for its hydrogen fuel cell trucks and build its Badger electric pickup truck.
Allegations of fraud and financial exaggeration against Nikola later emerged, placing pressure on the deal. Nikola publicly denied the allegations and disputed the claims made by short-sellers.
Following the allegations, GM assured investors that it has yet to close the deal with Nikola and that it will be looking into the allegations before it moves forward.
On Monday, GM confirmed that it had reached a new arrangement with Nikola that was still a memorandum of understanding and not yet a final deal. Under the new arrangement, GM will only be acting as a supplier to Nikola for components and equipment for its hydrogen-powered trucks.
Nikola said that it is willing to issue full refunds for deposits made by its Badger pickup truck customers. The company is currently not able to produce its own vehicles and executives previously said that the Badger pickup would only be built through a partnership with a third-party manufacturer.
A company spokesperson said that while it will be looking for another partner to build its Badger pickup, Nikola will be focusing on its core business of making zero-emission trucks for the commercial market.
Nikola is reportedly still trying to negotiate with GM for the possible use of its Ultium battery vehicle platform. GM is set to use the platform for all of its future electric vehicles.
"This went from a game changer deal for Nikola to a good supply partnership but nothing to write home about," analysts at Wedbush Securities wrote in a note to investors.
