Nikola (NASDAQ:NKLA) had marked the beginning of the EV stock mania back in 2020. However, just a few months later, the shares of EV company had fallen out of favor amid a monumental scandal. Now, however, it appears that the company is coming back on track. As a refresher, Nikola had become the subject of a controversy when the short-seller Hindenburg Research had alleged back in 2020 that, contrary to boisterous public claims, the company did not possess any worthwhile intellectual property pertaining to batteries or hydrogen fuel cells. However, the most damning aspect of the research house’s report dealt with the purported deceptive tactics of the company. To hammer this point home, Hindenburg had revealed that the Class 8 electric truck showcased in the “Nikola One in Motion” video by the company was actually cruising down a slope without any onboard propulsion. To add the cherry on top, a number of sexual misconduct allegations soon surfaced against Mr. Milton, transforming him into a toxic asset for the company and spurring his surprise departure. This scandal had caused the company to lose out on its lucrative partnership with General Motors. A slow confidence rebuilding process ensued where Nikola drastically curtailed its portfolio of Fuel-Cell Electric Vehicles (FCEVs) in order to focus on quality. Currently, the company boasts of a BEV and FCEV variant of the Nikola TRE truck as well as a fuel-cell-based Nikola TWO truck. While the BEV variant of Nikola TRE has been available since 2021, its FCEV counterpart is expected to enter production in 2023. Moreover, Nikola TWO is expected to enter production in 2024. This brings us to the crux of the matter. Nikola has now acquired Romeo Power in an all-stock deal worth $144 million. Under this arrangement, each Romeo Power share will be swapped for 0.1186 shares of Nikola. Moreover, Nikola will also furnish Romeo Power with $35 million in interim funding, including $15 million in senior secured notes and $20 million in battery pack delivery incentives. 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 deal will offer Nikola substantial vertical integration benefits, with cost savings of up to $350 million by 2026. Nonetheless, Nikola investors seem to be in a cautious mood right now. As an illustration, the EV manufacturer’s stock is currently down a little over 1 percent in pre-market trading. On the other hand, Romeo Power shares are up a whopping 23 percent.
