Nikola/Romeo Power: auto tech stars forced into distressed consolidation

Nicola Corp shares fall 90% from 2020 high. However, the electric truck maker may still be among the winners of the auto startups that have gone public through blank check mergers. company on Monday announced It will acquire Romeo Power, a manufacturer of EV battery technology with a capital value of only $144 million.

When Romeo listed its shares last year through a so-called Spac merger, it was valued at $1 billion. But now she’s worried enough to reveal a risk that she might run out of money. Nicola’s all-share deal values ​​its shares at just 74 cents each.

Almost every clean energy car company that has listed recently has struggled with technological viability, manufacturing capability and liquidity. Consolidation may be the only way to survive for many of these companies. And Nicola, as Romeo’s biggest client, should be particularly interested in his fortune.

Nicola may be best known for exaggerated claims about its electric truck that led to a $125 million fine from the US Securities and Exchange Commission. Still, it expects to deliver up to 500 battery-powered electric trucks in 2022, and says it could produce tens of thousands within a few years. Nicola says the vertical integration achieved by bringing Romeo in-house will ultimately save it $350 million a year in manufacturing and operating costs.

Designing and assembling an electric vehicle is difficult enough that most companies will choose to simply purchase components from a specialist. But with a seemingly cheap Romeo and the cost of the battery a crucial EV revenue, Nicola is making a measured bet on buying and operating a supplier. Nicola is providing $35 million in cash flow to Romeo to keep it afloat, but says eventually its unit cost for battery packs will drop by 40 percent.

Nikola’s market value is around 3 billion dollars. Analysts still believe that by 2024 it will be able to crack the barrier of annual revenues of one billion dollars. It will be a major feat to assemble enough EVs to support the valuation, as well as the state-of-the-art batteries that power them.

Nikola/Romeo Power: auto tech stars forced into distressed consolidation Source link Nikola/Romeo Power: auto tech stars forced into distressed consolidation

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