Down a Whopping 80% in 2021, Should You Scoop Up Shares of This Battery Company?

This Vernon, Calif. energy company, which is down significantly since the start of 2021, manufactures lithium-ion batteries for commercial electric vehicles (EVs) in two segments…

Romeo Power North America and Joint Venture Support. On December 30, 2020, the company went public through a SPAC deal with RMG Acquisition Corp. Romeo Power, Inc. (RMO – Get Rating) in enterprise value prior to the merger stood at $900 million.

Regarding this special purpose acquisition, RMO ex-CEO Lionel Selwood Jr. said, “We are very excited about completing our merger with RMG…At this inflection point, where regulation is driving electrification across the commercial vehicle industry, and adjacent sectors, Romeo Power’s energy technology is ready to meet the demand.”

However, RMO has declined 76.9% in price year-to-date, reflecting investor concerns over its declining financials and multiple changes in senior management. Selwood, who played a major role in RMO’s stock market debut, was replaced on August 6, following which the stock declined 26.8%.

Here’s what could shape RMO’s performance in the near term:

Several class action complaints have been filed against RMO alleging misleading statements made and the understating of potential risks and supply constraints. In addition, shareholder rights law firm Robbins LLP and Lifshitz Law Firm are currently investigating whether RMO’s board of directors has violated its duties or federal securities laws.

The law firms allege that RMO misled investors by stating that it had four battery cell suppliers instead of two. It also allegedly did not state that the company didn’t have sufficient battery cell inventory to meet its production targets and end-user demand in 2021.

Declining Financials

RMO’s revenues declined 18% year-over-year to $926,000 in its fiscal second quarter, ended June 30. This can be attributed to a 31.4% decline in Service revenues. Its operating loss widened 456.7% from the same period last year to $29.72 million, due to an 834.8% increase in SG&A expenses. Its adjusted EBITDA loss increased 376.7% year-over-year to $21.60 million, and its net loss came in at $28.67 million, up 308.2% from the prior-year quarter. Its loss per share increased…

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