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Two of the Southwest’s most embattled electric vehicle companies have joined forces in a deal worth $144 million. In an all-stock transaction, EV truck maker Nikola has acquired battery assembly company Romeo Power.
Both companies have faced close scrutiny and lost considerable value since their SPAC deals: Nikola went public valued at $3.3 billion in June 2020 and has since been fined $125 million by the Securities and Exchange Commission for misrepresenting its financials and prospective business opportunities to inflate the deal; Cypress-based Romeo Power went public in December of the same year in a deal valued at 1.33 billion. It has since seen its stock price fall from $34 per share to just $0.70. Today’s acquisition affirms that Romeo Power has lost more than 89% in value since going public.
The deal marks a logical—and maybe somewhat desperate—end point for the companies, which were already working closely together. Romeo Power has been the primary battery supplier for Phoenix-based Nikola, and Nikola has been Romeo’s largest client. The deal offers something of a lifeline to the struggling battery company: Romeo Power has considerable cash problems this year, and a new deal reportedly comes with $35 million in interim funding just to help the company stay afloat until the deal closes. In a press release issued by Romeo Power, the company claims that the acquisition will save Nikola $350 million per year by 2026.
It remains to be seen whether the deal will mark a turning point for the two struggling EV hopefuls or if it will prolong the inevitable. Nikola has considerably more cash on hand, but has yet to generate revenue. Vertically integrating their battery supply chain might help them save money, but the truck company is still in desperate need of more customers.
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