Romeo Power, Inc.

NYSE:RMO Stock Report

Market Cap: US$65.1m

This company has been acquired

The company may no longer be operating, as it has been acquired. Find out why through their latest events.

Romeo Power Management

Management criteria checks 0/4

Key information

Susan Brennan

Chief executive officer

US$4.3m

Total compensation

CEO salary percentage5.26%
CEO tenure1.2yrs
CEO ownership0.06%
Management average tenure1.2yrs
Board average tenure1.8yrs

Recent management updates

Recent updates

Seeking Alpha • Aug 09

Romeo Power: Merger With Nikola Is A Must

Infamous electric truck manufacturer Nikola is buying electric vehicle battery manufacturer Romeo Power. This merger arbitrage case is currently offering a 24% annualized return. The acquisition is likely to be approved by Romeo Power’s shareholders as the transaction has a strong strategic rationale while also providing the target with much needed liquidity. Vertical merger in the commercial electric vehicle (EV) space. Heavy-duty EV manufacturer Nikola (NKLA) is acquiring its lithium-ion battery supplier Romeo Power (RMO). The consideration is all-stock and values each RMO share at 0.1186 of NKLA stock. At current prices, the spread is at 8% and seems to be largely explained by borrowing fees which stand at ~10% on IB. A spike in borrowing fees remains a risk here and could erode the entire spread. Expected closing is in Oct'22 which would imply a 24% annualized return after deducting borrowing fees. NKLA Borrow Fees (Interactive Brokers) To acquire RMO, NKLA will launch a tender offer. The merger requires that at least 50% of RMO's shareholders participate in the exchange. All shares not tendered will be canceled and an amount equivalent to stock-consideration will be paid to these equity holders in cash. Other merger conditions, including regulatory approval and no bankruptcy of the target before the merger closes (discussed below), do not seem likely to present any issues here. For this reason, merger close hinges on the majority of shareholders participating in the tender. I see several reasons why this is likely: The transaction has strong strategic rationale as both companies are already tightly vertically integrated - RMO is NKLA's key battery pack supplier. Moreover, the combined company is projected to realize substantial cost synergies. The merger is expected to ease RMO's liquidity issues and avoid bankruptcy as the combined company will be able more easily raise funding for its operations. Moreover, NKLA will provide the target company with interim funding before the merger closes. The acquisition values RMO at a significant premium to the unaffected share price. RMO's shareholder base, which is largely institutional, has not voiced any concerns over the transaction. Strategic Rationale Strategic rationale for the combined company seems evident as NKLA seeks to secure and expand the supply of battery packs used in its electric semi-trucks. NKLA has recently emphasized that a short supply of battery packs, which are essential and the most expensive elements in electric truck production, has been one of the biggest obstacles in scaling NKLA's truck production. Despite the fact that NKLA already purchases the majority of RMO's battery packs - the buyer made 62% of the company's revenues in 2021 - capturing the remaining RMO's battery cell supply seems like a clear strategic benefit for NKLA in the current supply chain environment. With the transaction, NKLA will acquire RMO's newly built battery manufacturing facility and start to develop its in-house battery production capabilities. What is important to emphasize here is that RMO produces high-volume nickel-based battery cells as opposed to entry-level low-cost lithium iron phosphate or high performance specialty application technologies. Put simply, the company focuses on battery packs that can produce the longest range performance in trucks. Meanwhile, long range has been a focus of NKLA and has been highlighted as a key competitive advantage. In this light, the products of both companies seem highly complementary. NKLA's CEO during Q2'22 earnings call discussing the company's Tre BEV semi-truck: And as you point out, at this point, we have the longest range truck that we know about out there and it's performing extremely well. Romeo Power Investor Presentation, May 9, 2022 Moreover, the companies already have a strong ongoing engineering collaboration as some of NKLA's engineers have been working with RMO on battery packs which were produced for NKLA. More specifically, the companies worked closely on battery module and pack architecture, thermal systems and software battery management systems. With NKLA's knowledge of the target company and highly overlapping cell technology used/produced, the company estimates annual cost savings of up to $350m by 2026 - very significant compared to $694m and $96m in NKLA's and RMO's operating expenses in 2021. Cost synergies are expected to come from non-cell related battery pack costs (mostly battery enclosure cost savings) which are projected to be lower by 30%-40% by the end of 2023. Shareholders I expect RMO's shareholders to approve the merger given its strong strategic rationale. The all-stock structure of the deal will allow current RMO shareholders to realize synergies expected for the combined company. Moreover, the merger was announced at a 34% premium to RMO's closing price. At current NKLA share price, the premium to RMO's pre-announcement closing price is even higher at 56%. RMO's shareholder base appears to a significant degree institutional - six largest institutional shareholders, including Vanguard, Blackrock and Renaissance Technologies, hold a combined 24% stake. Another 10% is owned by Yorkville Advisors who acquired its stake via an equity purchase agreement (SEPA) with the company in Feb'22 at the average price of ~$1.50/share. I see incentives for these shareholders to approve the transaction to preserve the value of their shares given RMO's risk of bankruptcy and NKLA's superior liquidity position (see Financials below). Adding the company's management (2.5% stake) and smaller institutional shareholders, the count should handily exceed 50%. So far, none of the shareholders have voiced any opposition to the merger. Proxy advisory firms ISS and Glass Lewis have not issued their recommendations yet. Financials Ever since the IPO in Apr'19, RMO has been struggling to reach profitability. Recently, cash burn from SG&A and R&D has stood at around $25m-$30m while the current net cash position is at ~$38m. Production has picked up significantly this year, however, even assuming that the management could execute on its revenue guidance of $40m-$50m in 2022, the standalone company could realistically maintain its operations only through around H1'23. This suggests that there is a risk of bankruptcy should the company continue as a standalone entity. That said, the company becoming insolvent before the merger closes does not seem likely given recent production pick-up, current net cash position and interim funding to be provided by NKLA. Selected RMO financial data: 2019 2020 Q1'21 Q2'21 Q3'21 Q4'21 2021 2022 Q1 2022 Q2 Revenues 8.5 9.0 1.1 0.9 5.8 9.1 16.8 11.6 5.7 Gross Income -9.0 -8.7 -3.8 -5.0 -4.7 -7.8 -21.3 -17.7 -14.0 SG&A 13.9 17.3 18.0 22.9 17.6 22.2 80.7 22.2 18.7 R&D 11.2 8.0 3.8 1.8 4.7 5.0 15.3 6.7 7.1 Operating Income -38.5 34.3 -25.5 -29.7 -27.0 -35.0 -117.3 -82.0 -39.8 Net Income -59.9 -7.6 90.0* -28.7 -18.0 -33.4 10.0 -81.1 -40.4
Seeking Alpha • Mar 01

Where Art Thou Cash, Romeo?

History shows that only companies that need to raise cash urgently do Equity Lines of Credit. Other public companies in the space saw their share price decline 50% to 70% after issuance on their Equity Lines commenced. RMO's proposed Equity Line of Credit, relative to starting market cap, is about 18x larger than the Equity Line that NKLA embarked on before its stock declined 50%!
Seeking Alpha • Sep 17

Romeo Power: Battery Technology Junior May Have Got Strategy Wrong

Romeo Power is a small EV battery manufacturer based out of Los Angeles, California. The product of a SPAC deal consummated pre-pandemic, the timing could not have been harsher. Premised on out-of-the park growth and revenue numbers, the venture may have missed shifts in the automotive supply chain. With OEMs progressively looking to control battery manufacturing, this firm could possibly be left out in the cold.
Analysis Article • Aug 24

Romeo Power's (NYSE:RMO) Shareholders May Want To Dig Deeper Than Statutory Profit

Romeo Power, Inc.'s ( NYSE:RMO ) healthy profit numbers didn't contain any surprises for investors. We think this is...

CEO Compensation Analysis

How has Susan Brennan's remuneration changed compared to Romeo Power's earnings?
DateTotal CompensationSalaryCompany Earnings
Jun 30 2022n/an/a

-US$177m

Mar 31 2022n/an/a

-US$163m

Dec 31 2021US$4mUS$225k

US$10m

Compensation vs Market: Susan's total compensation ($USD4.29M) is above average for companies of similar size in the US market ($USD790.03K).

Compensation vs Earnings: Insufficient data to compare Susan's compensation with company performance.

CEO

Susan Brennan (59 yo)

1.2yrs
Tenure
US$4,286,750
Compensation

Ms. Susan Seilheimer Brennan has been Non-Executive Director of Senior PLC since January 1, 2015. She served as the Executive Vice President and Chief Operating Officer of Bloom Energy Corporation since No...

Leadership Team

NamePositionTenureCompensationOwnership
Susan Brennan
President1.2yrsUS$4.29m0.064%
$ 41.6k
Lionel Selwood
Senior Advisor & Consultant1.2yrsUS$7.65m0.036%
$ 23.1k
Kerry Shiba
CFO, Treasurer & Board Observer1.3yrsno data0.014%
$ 8.9k
Anne Devine
Chief Operating Officerless than a yearno datano data
Yun Han
Chief Accounting Officer1.3yrsno data0.013%
$ 8.2k
Matthew Sant
General Counsel & Company Secretary1.3yrsno data0.025%
$ 16.3k
Rosalie Rogers
Chief People Officerless than a yearno datano data
Lauren Webb
Chief Strategy & Commercial Officer and Director1.3yrsno data0.028%
$ 18.2k
Leon Kaunitz
Senior Vice President of Product Engineeringless than a yearno datano data
1.2yrs
Average Tenure
50yo
Average Age

Experienced Management: RMO's management team is not considered experienced ( 1.2 years average tenure), which suggests a new team.

Board Members

NamePositionTenureCompensationOwnership
Susan Brennan
President1.8yrsUS$4.29m0.064%
$ 41.6k
Kerry Shiba
CFO, Treasurer & Board Observer1.2yrsno data0.014%
$ 8.9k
Lauren Webb
Chief Strategy & Commercial Officer and Director1.8yrsno data0.028%
$ 18.2k
Laurene Horiszny
Director1.2yrsUS$22.49kno data
Paul Williams
Independent Director1.8yrsUS$308.73k0.012%
$ 7.5k
Robert Mancini
Independent Chairman1.8yrsUS$353.48k0.76%
$ 496.4k
Donald Gottwald
Independent Director1.8yrsUS$301.80k0.012%
$ 7.5k
Philip Kassin
Independent Director1.8yrsUS$313.73k0.78%
$ 507.4k
Timothy Stuart
Independent Director1.8yrsno datano data
1.8yrs
Average Tenure
62yo
Average Age

Experienced Board: RMO's board of directors are not considered experienced ( 1.8 years average tenure), which suggests a new board.

Company Analysis and Financial Data Status

DataLast Updated (UTC time)
Company Analysis2022/10/16 09:24
End of Day Share Price 2022/10/14 00:00
Earnings2022/06/30
Annual Earnings2021/12/31

Data Sources

The data used in our company analysis is from S&P Global Market Intelligence LLC. The following data is used in our analysis model to generate this report. Data is normalised which can introduce a delay from the source being available.

PackageDataTimeframeExample US Source *
Company Financials10 years
  • Income statement
  • Cash flow statement
  • Balance sheet
Analyst Consensus Estimates+3 years
  • Forecast financials
  • Analyst price targets
Market Prices30 years
  • Stock prices
  • Dividends, Splits and Actions
Ownership10 years
  • Top shareholders
  • Insider trading
Management10 years
  • Leadership team
  • Board of directors
Key Developments10 years
  • Company announcements

* Example for US securities, for non-US equivalent regulatory forms and sources are used.

Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more.

Analysis Model and Snowflake

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Learn about the world class team who designed and built the Simply Wall St analysis model.

Industry and Sector Metrics

Our industry and section metrics are calculated every 6 hours by Simply Wall St, details of our process are available on Github.

Analyst Sources

Romeo Power, Inc. is covered by 3 analysts. of those analysts submitted the estimates of revenue or earnings used as inputs to our report. Analysts submissions are updated throughout the day.

AnalystInstitution
Gregory LewisBTIG
Adam JonasMorgan Stanley
Gabriel DaoudTD Cowen