Home Production company Nikola buys a battery production company

Nikola buys a battery production company


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 markets itself as the leader in zero-emission transport and energy infrastructure, Romeo is known for providing advanced electrification solutions for vehicles.

This transaction will be an all-stock transaction worth approximately $144 million, where RMO holders will receive 0.1186 NKLA shares for each RMO share. Other details of the deal include Nikola providing $35 million in bridge financing, $15 million in senior secured notes and $20 million in package delivery incentives.

In addition to supply chain cost savings, Nikola expects the company to make other strategic rationales internally, including vertical integration and battery manufacturing.

At the time of writing, NKLA is down 2.41% in premarket trading, while RMO is up 25.44%.

NKLA Chart and Analysis

Over the past month, NKLA has traded between $4.42 and $6.88, down more than 39% year-to-date (YTD). While the short-term trend is positive, the long-term trend is negative, with significantly lower volume over the past two trading sessions.

The support line is located at $5.74, while the resistance is identified at $6.39.

NKLA 20-50-200 SMA line chart. Source. Finviz.com data. See more shares here.

Analysts believe the shares are being held, predicting the average share price over the next 12 months could reach $8.42, 35.37% higher than the current price of $6.22.

Wall Street analyst price targets for NKLA. Source: TipRanks

Robert Mancini, Chairman of the Board of Romeo Power, spoke in the press release about the importance that Nikola has had as a major customer, emphasizing that they will continue to create value together.

“As Romeo’s largest customer, Nikola has been the cornerstone of our development and growth, and this is a natural evolution of our relationship. Our products provide important critical energy density for heavy duty vehicles, We strongly believe that this combination provides the best opportunity for Romeo shareholders to participate in the continued value creation of a larger, stronger combined company.

NKLA is trading well below its June 2020 highs when investors were excited about the company’s potential. Mergers and acquisitions (M&A), as well as the delivery of functional products, should bring the company closer to its peak; however, investors will need to be patient for the company to reach that level.

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