PreMarket Prep Stock Of The Day: Romeo Power

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

Once a former SPAC becomes a real company it can go almost anywhere. One that has been volatile over the last two sessions is Romeo Power Inc. RMO.

The Company: Romeo Power is an energy technology company focused on designing and manufacturing lithium-ion battery modules and packs for commercial electric vehicles. Through its energy-dense battery modules and packs, Romeo Power enables large-scale sustainable transportation by delivering safer, longer-lasting batteries with longer range and shorter charge times.

Ridiculous Rally: Similar to most other SPACs, their journey emanates from the $10 level. While there's rampant speculation on what company will be acquired for the deal, there's also rampant speculation in its share price.

For this issue, it was nearly a four-bagger if one was able to exit at or near the top. From its Nov. 19 close ($10.53) it rallied all the way to $38.90 by Dec. 28. Its all-time closing high was posted the previous day at $34.

It should be noted that the top in the issue coincided with the announcement on Dec. 29 that its merger with the special purpose acquisition company RMG Acquisition Corp RMG was approved.

‘Sell The News’ And Then Some: As so some common with SPACs, once the deal is announced they go into freefall. That's exactly the case with Romeo Power. In fact, within four sessions of its all-time high, the issue was back at $19.10 and that was just the beginning of the selling.

The issue didn't make its ultimate low until Monday at $7.41, a few dollars lower than its initial pricing at the bargain price of $10. It rebounded to close at a new all-time closing low at $8.02.

Finally Some Good News: Before the open on Tuesday, the company announced it had entered into a long-term supply agreement with PACCAR for Peterbilt 579 and 520 battery-electric vehicles. This was the exact news the bulls were looking for.

After a modestly higher open, it immediately bottomed at $8.64, ripped all the way to $13.64, before retreating to end the session at $12.80. In today's session, it wasn't able to clear that closing price, peaking at $12.59 and profit-takes have come into the issue. It has continued to make new lows for the session with the current one being $10.54 as of 12:15 p.m.

Moving Forward: Sean Udall of Quantum Trading Strategies, who has been closely following the issue, had this to say about it: “The easiest most simple thing I can say about RMO is that the extreme selling over a revenue miss on a venture capital stage hyper-growth was fully absurd and lunatic.”

“As in this stage of 'early growth,' any given quarter of revenues is a total crapshoot and frankly meaningless," he said. "What matters far more to me and I suspect large investors, is the growth of backlog, tech advancement, prototype performance etc. Those latter factors being the reason I was a buyer of the RMO in the low/mid $8 handle.”