On August 1, Nikola Corporation (NASDAQ: NKLA) and Romeo Power Inc. (NYSE: RMO) announced that they had finalized an agreement, in which Nikola will acquire Romeo. While Nikola touts itself as the leader in zero-emission transportation and energy infrastructure, Romeo is known for delivering advanced electrification solutions for vehicles.
This transaction will be an all-stock transaction roughly worth $144 million, where holders of RMO will receive 0.1186 of NKLA stock for each share of RMO. Other details of the deal include Nikola providing $35 million in interim funding, $15 million in senior secured notes, and $20 million in pack delivery incentives.
Besides the supply-chain cost savings, Nikola expects other strategic rationales, including vertical integration and battery pack manufacturing the company will bring in-house.
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At the time of writing, NKLA is down 2.41% in premarket trading, while RMO is up 25.44%.
NKLA chart and analysis
In the last month, NKLA has been trading in the $4.42 to $6.88 range, down over 39% year-to-date (YTD). While the short-term trend is positive, the long-term is negative, with considerably lower volume in the last couple of trading sessions.
The support line is located at $5.74, while the resistance is identified at $6.39.
Analysts rate the shares a hold, predicting that the average share price in the next 12 months could reach $8.42, 35.37% higher than the current trading price of $6.22.
Robert Mancini, Romeo Power’s Chairman of the Board of Directors, discussed in the press release the importance Nikola has had as their largest customer, pointing out that they will continue to create value together.
“As Romeo’s largest customer, Nikola has been a cornerstone of our development and growth, and this is a natural evolution of our relationship. Our products provide critical energy density important to heavy-duty vehicles, <…> We firmly believe that this combination offers the best opportunity for Romeo shareholders to participate in the ongoing value creation at a larger scale, stronger combined company.”
NKLA is trading much lower than its June 2020 highs when investors were ecstatic about the firm’s potential. Mergers and Acquisitions (M&A), along with the delivery of functioning products, should bring the company closer to those heydays it once enjoyed; however, investors will have to be patient for the company to reach that level.
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