Following a report on Tuesday that it would not meet a Wednesday deadline to complete a deal announced earlier this month, Nikola stock dropped by about 7.4%. GM fared a bit better, losing just 2.4% for the day.

Neither GM nor Nikola commented on the report other than to say that discussions were continuing and more information would be provided “when appropriate or required.”

A quick review of the three major events that have led us to this point may be in order here.

According to the September 8 announcement, GM would take an 11% stake in Nikola and get a board seat in exchange for manufacturing and other in-kind assistance valued at $4 billion to $5 billion for producing Nikola’s Badger pickup and for providing fuel-cell technology for Nikola’s heavy-duty trucks.

The deal soured following a scorching report on Nikola from short seller Hindenburg Research released just two days after the GM-Nikola announcement. Hindenburg charged that Nikola did not have the advanced battery technology it claimed and that its founder and executive chair, Trevor Milton, had misled investors.

On September 21, Milton resigned both as executive chair and from the company’s board. He was replaced by Stephen Girsky, a member of Nikola’s board, who was named board chair. Girsky is a former vice chair of GM and a managing partner at VectoIQ, the special-purchase acquisition company (SPAC) that combined with Nikola in a reverse merger in June of this year. Two federal investigations also were reported (but not confirmed) to have begun.

While Nikola has borne the brunt of the bad press and tumbling share price, GM is unlikely to escape unsullied. Following the Hindenburg blast, CEO Mary Barra assured investors that the company had done its due diligence prior to striking the Nikola deal. The implication is that GM’s own engineers understand Nikola’s technology and think it is worth the risk.

For GM to pull out now would be an admission that the company screwed up and doesn’t know a hawk from a handsaw. That sort of embarrassment is not something GM wants any part of.

For Nikola, the stakes are much higher. The company’s shares jumped 40% on the announcement of the deal with GM to around $50 and closed Tuesday at just under $18. If the deal with GM is canceled, shares could drop to near their 52-week low of $10.27.

GM could (and probably should) drive a hard bargain with Nikola. For example, demanding an increase in the amount of equity from 11% to something like 20% or more with no change to GM’s side of the equation. Maybe even a second board seat. Can Nikola really risk refusing?

Nikola stock had regained about 5% of its share price since the opening bell Wednesday to trade at around $13.80. The stock’s 52-week high is $93.99, and the consensus 12-month price target is $37.00. Investors seem to expect that GM and Nikola will announce a deal. The devil will be in the details.

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