Romeo Power Inc.’s time as a stand-alone Orange County-based company will be short-lived, following a takeover by fellow electric vehicle firm Nikola Corp. in a deal worth about $144 million.
Cypress-based Romeo (NYSE: RMO), a maker of electric vehicle batteries that in late July moved its headquarters from Los Angeles County to its new home in OC, last week announced it was selling itself to Nikola (Nasdaq: NKLA), a Phoenix-based maker of electric and hydrogen-powered semi-trucks valued around $3.3 billion.
Nikola is Romeo’s main customer and was committed to purchasing about $243 million of the company’s battery modules and packs, according to Romeo’s latest annual report.
Despite that existing contract, and a public offering near the start of 2021 that provided Romeo with nearly $400 million in funding, the Cypress firm’s short-term viability was in doubt.
In Romeo’s latest quarterly report, the company expressed “substantial doubt” about its ability to operate as a going concern for the next year. It had $41.3 million of cash and equivalents on its books as of March 31.
As part of the sale, expected to close in October, Nikola is providing $35 million in interim financing.
Cypress Ops Remaining
The sale announcement came just a week after Romeo Power announced the completion of its move from the southern Los Angeles town of Vernon to its new 215,000-square-foot manufacturing center and headquarters in Cypress.
The building was designed for testing, engineering, design, quality, production, shipping and support services.
The company said last year it would be bringing more than 250 workers to the space at 5560 Katella Ave.
It will remain operational post-sale, Nikola officials said last week.
“We’re thrilled that Romeo’s Cypress, California facility will become our battery center of excellence going forward after closing,” Nikola CEO Mark Russell said in a message to Romeo Power employees last week.
“This is a big strategic move for us,” Russell said. “It’s one that brings battery pack engineering and production in-house. We believe that Romeo’s proven technology and expertise will help us accelerate our product development, increase the range and charge rates of our trucks, and improve our customers’ experience.”
The new site in Cypress contains 24,000 square feet of office space dedicated to engineering, product management, quality and other support resources, and another 191,000 square feet of factory space dedicated to automated module manufacturing, pack assembly and advanced testing laboratories.
Nikola’s headquarters in Arizona run 150,000 square feet; it also owns 400 acres in the state for its expanding manufacturing operations, which currently runs some 250,000 square feet, according to local reports. It employs about 1,200 people, compared to more than 300 for Romeo Power.
Exec Roles Unclear
Romeo Power’s products are designed to power commercial vehicles such as trucks, buses and delivery vans.
Cypress “offers a great location for us because of its proximity to both Los Angeles and Orange County, a diverse workforce, and an established and thriving business corridor,” Romeo CEO Susan Brennan said in a July statement touting the new facility.
Brennan’s role in the company post-sale wasn’t disclosed. Romeo Power Chairman Robert Mancini was the only company exec named in last week’s sales announcement.
The same day as the deal with Nikola was announced, Romeo Power said that its Chief Technology Officer, Abdul Kader El Srouji, had left the company.
The all-stock deal values Romeo Power at about $144 million and 74 cents a share, and represents a 4.5% pro forma ownership of Nikola, the companies said on Aug. 1.
That’s only a fraction of Romeo Power’s value at the start of 2021, when the company went public via a reverse merger with a special purpose acquisition company, commonly known as a SPAC. That deal valued the company around $900 million, and also provided an additional $394 million in funding.
The past 12 months have been difficult for Romeo Power’s share price, alongside most other EV makers on Wall Street, several of which went public via the SPAC route.
Just a year ago, the company’s shares were trading at $7 apiece, but were just 70 cents apiece around the time the Nikola deal was struck.
Nikola stock climbed nearly 10% to $7.75 apiece following news of the acquisition. The company also went public via the SPAC route in mid-2020, and saw a steep initial run-up in stock price, for a while nearing $20 billion in market value. It has since seen its own decline, and now trades below its SPAC parent’s $10 per share value.