CIIG Merger Corp.

CIIC Details

Arrival to List on NASDAQ Through Merger with CIIG Merger Corp: CIIG Merger Corp (NASDAQ: CIIC) is a special purpose acquisition company, engaged in merger, capital stock exchange, asset acquisition, reorganization, or business combinations. As on 24 November 2020, the market capitalization of the company stood at ~$878.78 million. The company has recently entered a definitive business combination agreement with the electric vehicle company, Arrival. As per the agreement, the newly combined company will be named Arrival Group and will be listed on the NASDAQ under the symbol ARV. The combined company is valued at an enterprise value of $5.4 billion and is expected to provide gross cash proceeds of ~$660 million. Arrival has developed a new method of designing and producing zero-emission vehicles and has signed contracts with total order value up to $1.2 billion. The transaction is expected to close in Q1FY21.

Quarterly Financial Highlights (For the Period Ended 30 September 2020): During the quarter ended 30 September 2020, the company incurred operating expenses of $184.6k and earned an interest of $64.92k on marketable securities. At the end of the same time period, the company reported a net loss of $122.85k, reflecting an increase from $1k in the pcp.

Stock Recommendation: Arrival seems well positioned to capitalize on market opportunities with its technology driven approach. However, the combined entity may witness some uncertainty in the short term. As per NASDAQ, the stock of CIIC is trading close to its 52-weeks’ high level of $33.50. The stock of CIIC gave a return of 165.59% in the last one month. On a technical front, the stock of CIIC has a support level of ~$25.5 and a resistance level of ~$33.44. Considering the current trading levels, uncertain market conditions, key investment risks, and merger with Arrival, we suggest our investors to keep an eye on the business activities and recommend an ‘Avoid’ rating on the stock at the current market price of $27.17, up by 6.76% on 24 November 2020.

CIIC Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

RMG Acquisition Corp

RMG Details

Romeo Power Technology to List on NYSE Through Merger with RMG: RMG Acquisition Corp (NYSE: RMG) is a special purpose acquisition company and has experience in power, renewable energy, environmental services, energy technology, and corporate governance. As on 24 November 2020, the market capitalization of the company stood at ~$341.55 million. The company has signed a definitive agreement for a business combination with Romeo Power Technology. Upon the completion of the transaction, the combined company is expected to remain listed on the NYSE under the name of Romeo Power, Inc. with a new ticker symbol RMO. The business combination values Romeo Power at ~$1.33 billion pro forma equity value and transaction is likely to be completed in the 4Q20. 

Investment Highlights (Romeo Power Technology): Romeo Power Technology retains a leading edge technology at competitive total cost of ownership. It has significant strategic partnerships and is likely to reduce execution risks and deliver competitive advantages. Over the span from FY22 to FY25, the revenue potential is likely to grow at a CAGR of 59% and is likely to report a sustainable projected run-rate EBITDA margin of over 20%.

Expected Revenue Growth (Source: Company Reports)

Romeo Power Secures $234 Million Multi-Year Production Contract: Romeo has secured a multi-year production contract with a leading OEM in North American electric commercial transportation, The Lion Electric Co, which is expected to generate $234 million in revenue over a five-year span starting from 2021.

Quarterly Financial Highlights of RMG (For the Period Ended 30 September 2020): During the quarter ended 30 September 2020, the company earned $28.5k from interest on restricted cash equivalents but incurred a loss of $491k, down from a profit of $658.15k in 3Q19. At the end of September 2020, the company had a cash balance of $315.5k. 

Quarterly Financial Highlights (Source: Company Reports)

Guidance: Romeo Power Technology has provided guidance and expects to report revenue of $412 million in 2022 and $1.65 billion revenue in 2025. EBITDA margins are anticipated to expand to 20% in 2025 as the company consolidates its market position and deepens portfolio penetration, including BMI product.

Stock Recommendation: The combined entity is likely to have a large and attractive addressable market. It retains a decent pipeline for commercialization and production ramp in 2021. As per NYSE, the stock of RMG is trading close to its 52-weeks’ high of $12.24. The stock of RMG gave a return of 16.58% in the past three months and a return of 15.0% in the last one month. On a technical front, the stock has a support level of ~$11.47 and a resistance level of ~$12.24. Considering the expected benefits from the merger with Romeo Power Technology, its strategic partnerships with global leaders, and revenue growth potential, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $11.88, up by 5.13% on 24 November 2020.

RMG Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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