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Romeo Power, a company that designs and manufactures lithium-ion battery modules and packs for commercial electric vehicles, is on the cusp of achieving a major milestone. Should the shareholders of the Special Purpose Acquisition Company (SPAC), RMG Acquisition (NYSE:RMG), approve the proposed merger agreement with Romeo, the shares of the combined company would commence trading on the stock exchange.
Readers should note that a Special Purpose Acquisition Company (SPAC) does not possess any intrinsic value. Rather, this is basically an investment vehicle that utilizes its IPO proceeds to acquire a private company. We had speculated in a recent post that the closure of the merger agreement between RMG Acquisition and Romeo Power was imminent, as evidenced by the intimation of a date of record for the determination of eligible stockholders:
"On Wednesday, the 25th of November, RMG Acquisition filed a Form 425 with the SEC, intimating the 1st of December 2020 as the date of record for the determination of stockholders eligible to receive the proxy and vote at the upcoming special meeting."
This brings us to the crux of the matter. As per the Form 424B3 filed by RMG Acquisition just moments ago, a special meeting of the SPAC’s shareholders has now been scheduled to approve the merger with Romeo Power:
“NOTICE IS HEREBY GIVEN that a special meeting of RMG Acquisition Corp. (“RMG”), a Delaware corporation, will be held at 10:00 a.m. eastern time, on December 28, 2020, in a virtual format.”
As a refresher, Romeo Power currently offers battery packs to three categories of commercial vehicles – medium-duty short-haul trucks, heavy-duty long-haul trucks, and specialty trucks and buses. The company is an attractive bet for electric vehicle OEMs as its battery packs have a highly flexible architecture, allowing for rapid adaptability and scalability. For instance, the company’s 1 MWh packs are ideal for long-haul electric trucks. Moreover, these battery packs are not bound to one cell supplier, eliminating the supplier risk as well as the risk of technological obsolescence. Finally, these battery packs form a part of an established recycling program intended to reduce the carbon footprint of depleted batteries.
As far as finances are concerned, Romeo Power already has contracted revenue of around $310 million, with a further $2.4 billion in revenue currently under negotiation. Additionally, the company expects to earn annual revenue of $412 million in 2022. However, by 2025, its top-line metric is expected to swell to $1.65 billion, constituting growth of around 300 percent.
Given the momentous nature of today’s development, it is hardly surprising that RMG Acquisition shares are surging. As an illustration, after registering a gain of over 10 percent in the regular trading session, the stock is up another 12 percent in the after-hours session, spurred by the imminent closure of the merger agreement with Romeo Power.