Shares of Nikola Corporation (NASDAQ: NKLA) are plummeting by 5.10% during pre-market trading today. This significant decline comes on the heels of a report released by Reuters, revealing that Nikola is set to liquidate the assets of battery maker Romeo Power. The electric truck manufacturer announced this decision on Monday, marking a stunning turn of events just months after acquiring Romeo Power.
Nikola, which went public in 2020, has been grappling with the weight of sky-high expectations from early investors. The past year has been particularly challenging for the company due to inflated commodity costs and limited access to capital. These factors have undoubtedly contributed to the struggles faced by Nikola.
The acquisition of Romeo Power for approximately $144 million in stock was a key move for Nikola. The company aimed to kickstart its battery pack production efforts through this strategic partnership. However, in an unexpected twist, Nikola has now made the decision to sever ties with Romeo Power and has initiated proceedings under the California Assignment for the Benefit of Creditors (ABC) statutory scheme. A spokesperson for Nikola confirmed this news in a statement on Monday.
It appears that Nikola’s hardships are not unique in the electric vehicle (EV) startup industry. Similar challenges have been witnessed by other companies in this space. Earlier this week, British EV van maker Arrival announced its intentions to terminate its merger with a blank-check firm. Furthermore, just last week, Lordstown Motors (NASDAQ: RIDE) filed for bankruptcy.
On the other hand, industry leader Tesla has managed to surpass market expectations for second-quarter deliveries. The company’s success can be attributed to strategic price cuts and the availability of U.S. federal credits, which have made Tesla’s electric vehicles more affordable.
Romeo Power holds a significant role as one of the battery suppliers for Nikola’s prototype electric trucks. Alongside LG Energy Solution and Proterra Inc., Romeo Power has played a major role in Nikola’s journey to revolutionize the electric truck industry.