Nikola Corp. is liquidating Romeo Power, the battery pack maker it acquired for $144 million in stock less than a year ago.
The move forces startups suing Nikola over canceling Romeo orders to get in line for a possible payout of alleged damages from contract breaches.
It also removes a distraction for financially ailing Nikola, which has pivoted from manufacturing battery-electric trucks to focus on fuel cell electric vehicles (FCEVs). The hydrogen-powered trucks require just two battery packs compared to nine for battery-electric vehicles. Those packs are being sourced from Proterra Inc.’s plant in Greer, South Carolina.
Nikola’s hydrogen ambitions got a boost Wednesday with the awarding of a $41.9 million grant from the California Transportation Commission to build six heavy-duty hydrogen truck fueling stations in the state. In addition to fuel cell trucks, Nikola’s Hyla brand is building out a fueling infrastructure.
Nikola keeps license to use Romeo technology
Nikola retained a licensing agreement to use Romeo technology for a build-to-order plan for Tre BEVs, which failed to attract the customer interest Nikola expected since it began production a year ago. The company said Wednesday it sold 66 Tre BEV trucks in the second quarter while building just 33. The higher retail sales helped trim inventory of unsold trucks.
A fire involving multiple trucks on a lot at the plant in Coolidge, Arizona, remains without a cause. Nikola initially said the June 24 blaze was of suspicious origin. Nikola had announced the layoff of 270 employees on June 16. A battery defect is also possible, according to a June 27 report by Electrek.
Nikola and Romeo canceled contracts for other customers
The all-stock purchase of Romeo in July 2022 kept Nikola production going. If Romeo failed, Nikola would have had to stop production, even though it was receiving only one battery pack a day from Romeo. After the purchase, Nikola found that Romeo had been discounting the packs by $110,000 each. Nikola said it would take five quarters to reduce the cost of the batteries.
At the time of the sale, Nikola indicated it would honor contracts Romeo had with other electric truck manufacturers but had no plans to become a “merchant of batteries.”
Ultimately, Romeo, operating as a Nikola subsidiary, failed to deliver on commitments to Lion Electric Co. and Lightning eMotors, startups making electric school buses and other electric vehicles. Both Lion and Lightning sued Nikola.
“We would like to recover the damages, but in the meantime we’ve moved on, meaning we’ve now integrated our CATL [Contemporary Amperex Technology Co. Ltd.] and Proterra batteries,” Lightning CEO Tim Reeser told FreightWaves in a recent interview. “That’s working very well, and so we’re past it.”
Nikola said in a Securities and Exchange Commission filing on Monday that it had transferred ownership of all of Romeo’s tangible and intangible assets to SG Service Co. LLC to deal with Romeo creditors. Romeo is paying SG $100,000 plus fees and 1% of proceeds from asset sales in the liquidation.
The company hinted at a potential restructuring of Romeo in its first-quarter 10-Q SEC filing. “The restructuring may include the sale, license, transfer or other disposition of some or all of Romeo’s assets and may include the commencement of a proceeding under the California Assignment for the Benefit of Creditors statutory scheme” or a bankruptcy reorganization.
Delaware rule change will get Nikola its share authorization increase
Separately, voting closes at 11:59 p.m. EDT Wednesday in advance of Nikola resuming its virtual annual meeting on Thursday. The company is asking shareholders to approve a doubling of authorized shares from 800 million to 1.6 billion. The shares would be sold to help Nikola raise cash to pay interest due on a $200 million load from hedge fund Antara Capital.
The outcome of Proposal 2 is effectively already decided in Nikola’s favor regardless of whether it secured a 50% majority plus one vote required for passage. The Delaware House of Representatives on Friday adopted amendments to the Delaware general corporation law lowering the threshold of votes from a majority of outstanding shares to shares voting.
Delaware Gov. John Carney has yet to sign the bill, which the state Senate approved in May. So it is possible Nikola would adjourn Thursday’s meeting a second time if too few votes are cast in favor of Proposal 2. But the company could suspend seeking more votes since the legislation it needs has passed both chambers in Delaware and is a signature away from becoming law.
Nikola also has escaped for now the threat of delisting from the Nasdaq. Its share price, which had fallen as low as 52 cents, has staged a comeback in recent weeks. It traded above $1 a share for 10 consecutive trading days. Nikola shares closed Wednesday at $1.43, up 6 cents or 4.38%.
Editor’s note: Updates with Nikola receiving $41.9 million grant from California for hydrogen fueling stations and closing stock price; Corrects voting cutoff time
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