The possibility of RMG Acquisition Corp taking off is becoming clear after reaching an agreement that strengthens its growth metrics and long-term prospects. A definitive agreement with Romeo Power is one that cannot be taken for granted, as it expands the company’s footprint into one of the fastest-growing segments in the auto industry.
RMG Acquisition Outlook
RMG Acquisition did spike to all-time highs after it emerged it is poised to merge with Romeo Power, resulting in a combined company with an eye on the electric car segment. The definitive agreement provides a way for Romeo Power to go public.
For RMG Acquisition, the definitive agreement is a major milestone for a company that has struggled for direction in recent weeks. The merger will result in a combined company valued at close to $1.3 billion, with exposure to a segment with tremendous growth opportunities.
The merger comes a year after RMG Acquisition went public, resulting in Chairman James Carpenter and President Philip Kassin raising $230 million. The company has announced plans to raise $150 million in equity to support the proposed merger deal.
A spike to all-time highs of $11.88 on a high-turnover in traded shares affirms renewed investor interest ahead of the proposed merger. While the stock has pulled from record highs, the pullback might as well be a minor correction pending a bounce back to 52-week highs. The fact that RMG Acquisition is poised to be a key developer of Lithium-ion batteries used in powering electric cars is a catalyst that should continue to strengthen the stock sentiments in the market.
RMG Acquisition remains well supported above the $10 a share level, above which it remains bullish and likely to continue powering high. A sell-off followed by a close below the support level would leave the stock susceptible to further drops.
About RMG Acquisition
RMG Acquisition does not have a definite core business. Instead, the company identifies, acquires, and operates businesses in diversified resource and industrial material segments. It also maintains operations in the chemicals, energy services, and power sectors. A merger with Romeo Power is poised to be a game-changer in expanding its operations into the electric battery segment.
Why did RMG Acquisition Explode?
Electric Vehicle Battery Opportunity
RMG Acquisition shares rallied on a huge turnover of traded shares, having become clear that the company is poised to be a key player in developing batteries for fuelling the electric car spectacle.
Valued at $13.8 billion as of 2018, the electric vehicle battery market is growing at a compound annual growth rate of 18.05% and could be worth $133.46 billion by 2027
A definitive agreement with Romeo Systems marks a major milestone in RMG Acquisition evolution as it is poised to expand its operations into a segment with tremendous opportunities for growth. Romeo Systems casts itself as a leading energy technology company engaged in developing lithium-ion battery modules and packs used in commercial electric cars.
Romeo Power Edge
Romeo Power joins RMG Acquisition with a 7GWh capable manufacturing facility in Los Angeles. The company also boasts of state of the art manufacturing operations designed a scale for high growth in the development of lithium-ion batteries for electric cars.
RMG Acquisition is poised to be a key developer of electric batteries serving medium-duty short-haul and heavy-duty long haul trucking markets. As the era of gas-powered vehicles slowly comes to an end, the combined company should be able to register booming business given the number of companies working on electric cars and in dire need of electric batteries.
A merger of the two companies will result in a combined company that has the potential to lead the electrification of the global commercial vehicle market. Likewise, the market opportunity is vast, given the commercial vehicle market is estimated to be worth $665 billion, with over $17 billion vehicles sold annually.
More than 7 million vehicles are sold annually in North America, leading to a total addressable market valued at $225 billion. Given the ongoing transition from gas-powered to electric cars, the opportunity for growth is immense as demand for electric vehicles continues to rise.
Romeo Power has already inked varying forms of agreements with customers in dire need of electric car batteries. The agreements enhance the combined company visibility into future growth in addition to $300 million in contracted revenue.
One of the strategic deals is with global Tier 1 automotive supplier BorgWarner. In 2019 BorgWarner made a $50 million investment in Romeo Power to amplify its growing portfolio and alternative product development for electric vehicles.
Romeo Power also joins RMG Acquisition with a strategic partnership with Heritage Group, a leader in environmental and recycling services. With Heritage Group, the combined company should be a key player co-development of battery re-use and recycle facility for batteries near or at the end of life.
Heritage Group has also committed to ensuring 500-diesel trucks in its fleet are converted into battery electric vehicles Using Romeo’s Power batteries over the next four years.