April 16, 2021 - An investor in shares of Romeo Power, Inc. (NYSE: RMO) filed a lawsuit in the U.S. District Court for the Southern District of New York over alleged violations of Federal Securities Laws by Romeo Power, Inc. in connection with certain allegedly false and misleading statements made between October 5, 2020 and March 30, 2021.
Vernon, CA based Romeo Power, Inc., is an energy storage technology company, designs and manufactures lithium-ion battery modules and packs for commercial electric vehicles in North America. Romeo Power, Inc. asserts that through its industry leading energy dense battery modules and packs, it enables large-scale sustainable transportation by delivering safe, longer lasting batteries with shorter charge times.
Romeo Power’s core product offering purportedly serves the battery electric vehicle (BEV) medium duty short haul and heavy duty long haul trucking markets, as well as specialty trucking and buses.
On February 12, 2019, RMG Acquisition Corp., a New York City-based special purpose acquisition company, or SPAC, announced that it closed its initial public offering of 20 million units at $10 per share, resulting in gross proceeds of $200 million. RMG Acquisition Corp was formed by defendants D. James Carpenter, Robert Mancini, and Philip Kassin, and was formed for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses in the diversified resources and industrial materials sectors.
On October 5, 2020, RMG Acquisition Corp announced a definitive agreement for a business combination with defendant Romeo Power that would result in Romeo Power becoming a publicly listed company. On December 29, 2020, Romeo announced that it completed its business combination with RMG Acquisition Corp. The business combination was approved by RMG Acquisition Corp stockholders in a special meeting held on December 28, 2020 and consummated on December 29, 2020. For 2020 Romeo Power, Inc estimated revenue of $11 million, and for 2021 Romeo estimated revenue of $140 million.
On March 30, 2021, Romeo Power, Inc disclosed that its production had been hampered by a shortage in supply of battery cells and that its estimated 2021 revenue would therefore be reduced by approximately 71%-87%.
Shares of Romeo Power, Inc (NYSE: RMO) declined to as low as $7.71 per share on April 5, 2021.
According to the complaint the plaintiff alleges on behalf of purchasers of Romeo Power, Inc. (NYSE: RMO) common shares between October 5, 2020 and March 30, 2021, that the defendants violated Federal Securities Laws.
More specifically, the plaintiff claims that between October 5, 2020 and March 30, 2021, Romeo Power, Inc was suffering from an acute shortage of high quality battery cells, which are key raw materials for Romeo’s battery packs and modules, due to supply constraints. Contrary to Defendants’ representations, that Romeo Power, Inc had only two battery cell suppliers, not four, that the future potential risks that Defendants warned of concerning supply disruption or shortage had already occurred and were already negatively affecting Romeo’s business, operations and prospects, that Romeo Power, Inc did not have the battery cell inventory to accommodate end-user demand and ramp up production in 2021, that Romeo’s supply constraint was a material hindrance to Romeo’s revenue growth, and that Romeo’s supply chain for battery cells was not hedged, but in fact, was totally at risk and beholden to just two battery cell suppliers and the spot market for their 2021 inventory. Given the supply constraint that Romeo was experiencing during the Class Period, Defendants had no reasonable basis to represent that the Company had the ability to meet customer demand and that it would support growth in revenue in 2021.