Nikola Corp. will acquire Romeo Power Inc. for a sliver of what the battery maker was worth when it merged with a special purpose acquisition company less than two years ago.
The all-stock transaction between two manufacturers that went public via blank-check deals in 2020 values Romeo Power at about $144 million, according to a statement Monday. That’s only about 11% of the roughly $1.33 billion value at which California-based Romeo Power agreed to merge with a SPAC.
Nikola and Romeo Power were among the litany of companies with little or no meaningful revenue to take advantage of a hot market for mergers that offer an alternative to initial public offerings and the ability to entice investors with forward-looking statements. Many of these companies have struggled to meet forecasts they made before combining with SPACs, which has sent share prices plummeting and drawn attention from securities regulators.
Romeo Power shares jumped as much as 30% to 72 cents on Monday in New York trading, while Nikola stock climbed as much as 5.1% to $6.54.
Nikola has sourced battery packs from Romeo Power for Tre electric trucks built in Germany by its partner Iveco Group NV, the commercial-vehicle maker spun off from CNH Industrial NV early this year. Nikola also recently started production at its own facility outside Phoenix, and Chief Executive Officer Mark Russell has said the company expects to deliver as many as 500 vehicles to customers this year.
Nikola is Romeo Power’s largest customer and has agreed to provide $35 million of interim funding to help its supplier keep operating until the deal closes. After ending the first quarter with just $41.3 million of cash, Romeo Power warned investors there was substantial doubt regarding its ability to continue as a going concern.
While Nikola is better positioned with more than $360 million of cash as of the end of March, it’s also looking for more money. The company has held, adjourned and rescheduled its annual meeting several times to allow investors additional chances to vote on a proposal to increase its number of shares of outstanding and raise capital. The next meeting is scheduled for Tuesday.
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