Embattled commercial hydrogen truck maker Nikola Motor has announced the acquisition of battery maker Romeo Power Inc. in an all-stock deal valued at approximately $144 million.
The acquisition comes as the company persuades shareholders to approve a proposal to create 200 million new ordinary shares by 11:59 p.m. on August 1.
The company has postponed its shareholder meeting three times since June 1 – including adjourning it until Tuesday, in a bid to engage shareholders on the proposal, and the the latest effort includes a video plea from CEO Mark Russell to investors to approve the new share issue.
Russell says in the video that the company is “less than half a percent” of the votes needed to approve the measure, which is designed to give the company the flexibility “it needs” to grow internationally. future, he said within 90 seconds. video.
A great request to shareholders
The proposal may be a tough sell as it involves a potential 33% dilution of shareholder value. The company originally authorized 600 million shares, of which there are still about 185 million unissued.
The company also raised about $200 million in the debt market earlier this year to maintain liquidity and support the manufacturing and delivery of its battery electric and hydrogen fuel cell utility vehicles. The company forecasts around $120 million in revenue for 2022.
“We began production of the Tre BEV on March 21 here at Coolidge and today we are celebrating this milestone and the first truck shipments to our customers,” Russell said in April. “In 2022, we are moving forward with all aspects of our business. Next year, fuel cell electric vehicles are expected to be added to the manufacturing mix. We focus on vehicle delivery and revenue generation.
Strategic acquisition of battery production
Coinciding with the August 1 shareholder voting deadline, Nikola announced the $144 million acquisition of Cypress, Calif.-based battery maker Romeo Power. The company focuses on the design and manufacture of lithium-ion battery modules and packs for commercial vehicle applications.
With a current market capitalization of just $98.53 million, the deal is a gift to Romeo Power shareholders. Romeo shareholders will also receive a 4.5% stake in Nikola as part of the deal.
Romeo Power is already Nikola’s battery supplier, and the merger simply brings battery production in-house for the truck maker. Nikola expects the acquisition to result in significant operational improvement and reduction in battery production costs.
“With control of core battery technologies and the manufacturing process, we believe we will be able to accelerate the development of our electrification platform and better serve our customers,” Russell said.
Economic and legal turmoil
As the company continues to look to grow, it can’t seem to escape its controversial business, especially one linked to founder Trevor Milton. He is currently facing criminal charges of cable and securities fraud, based on allegations by misleading investors about Nikola’s product development and business prospects. Among other allegations, some charges involve the purchase of real estate in Utah using Nikola stock options.
Milton resigned from the company in September 2020, and the company paid $125 million in December 2021 to settle civil lawsuits brought by investors. Shares of the company were trading as high as $65.90 per share in June 2020, but fell to $9.87 per share at the end of 2021. The company is currently trading at around $6.44 per share. stock.
As with any vehicle manufacturing business, Nikola’s job is a tough one. To build its trucks and earn $120 million this year, the company expects to spend significantly on capital expenditures for its production plant and operating costs. In total, the company expects to post a substantial loss for the year. The recession outlook could push Nikola and many other start-up vehicle makers further into red ink territory.
deliver the product
Nikola will announce its second quarter results on Thursday, August 4. In the first quarter of 2022, the company announced purchase orders for 134 of its Nikola Tre electric commercial trucks and 11 customer shipments in the month of April.
“During the first quarter, we achieved a significant milestone with the start of mass production of the Nikola Tre BEV at our manufacturing facility in Coolidge, Arizona, and we are now delivering salable trucks to dealerships for customer deliveries. “Russell said. “We look forward to ramping up production and delivering 300 to 500 production vehicles to customers this year.”
The company has also completed Phase 1 of its production plant in Coolidge, Arizona. The initial facility would have a production capacity of up to 2,500 trucks per year. The company is currently working on a phase 2 expansion, which would increase capacity to 20,000 trucks per year.
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