Why Romeo Power Stock Is Higher Today

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What happened

Shares of Romeo Power (NYSE:RMO) were trading higher on Tuesday afternoon as bargain-hunting investors moved in following a sell-off in the newly public battery-maker’s shares. 

As of 1:15 p.m. EST, Romeo Power’s stock was trading at $20.54, up about 7.5% from Monday’s closing price.

So what

The California-based company, which is gearing up to make batteries for electric trucks and buses, has had a rough ride since its debut in the public markets on Dec. 30 following its merger with special-purpose acquisition company RMG Acquisition.

RMG’s stock — which became Romeo’s after the merger — was bid up over $30 in December as investors eager for electric-vehicle stocks snapped up shares ahead of the merger. If we’re mindful of the old adage, “Buy the rumor, sell the news,” we probably shouldn’t be surprised that the stock had a letdown after the merger closed on Dec. 29.

Today is a different story, however, as investors wade back in. 

Romeo Power signed a deal to supply batteries to electric-bus start-up Lion Electric in November. Image source: The Lion Electric Company.

Now what

Romeo isn’t a fly-by-night start-up. It counts first-tier auto supplier BorgWarner and trash-hauling giant Republic Services among its strategic investors, and it secured a $234 million contract to supply batteries to Canadian electric-bus start-up Lion Electric in November. 

Romeo’s focus on batteries for trucks and buses puts it in a different niche from many of the other newly public companies in the electric-vehicle space. It’s a segment that hasn’t received as much attention from investors as (for instance) electric luxury cars, but that is likely to be a sizable market in the not-too-distant future as commercial fleets move to zero-emissions vehicles. 

Auto investors can look forward to hearing more from Romeo’s leadership team when the company reports fourth-quarter earnings, likely next month.