Shares of DiamondPeak Holdings Corp. (NASDAQ: DPHC), a special purpose acquisition company (SPAC), jumped 30% on Monday after the company announced it will merge with electric vehicle manufacturer Lordstown Motors to effectively take it public.
The deal represents two areas of particular investor interest this year: SPACs and electric vehicle start-ups.
SPACs are also known as “blank-check companies,” since investors fork over money without knowing when, or even what for, their capital will be used.
Once the SPAC goes public, the goal is then for it to acquire or merge with a private company, thereby taking it public.
Amid market uncertainty and a lackluster IPO market, SPACs are on pace to raise a record amount of capital this year.
The merger between DiamondPeak and Lordstown, which is expected to close in the fourth quarter of 2020, represents the third deal between a SPAC and an electric vehicle start-up so far this year.
Here’s What You Need to Know About Lordstown Motors Before It IPOs
Lordstown was founded in 2019 by CEO Steve Burns, who previously ran fellow electric vehicle startup Workhorse Group Inc. (NASDAQ: WKHS).
In fact, Lordstown was more or less spun out of Workhorse last year. The company purchased intellectual property from Workhorse for its electric pickup truck for $15.8 million and a 10% stake in the company.
Lordstown then purchased a 6.2 million square foot plant from General Motors Co. (NYSE: GM) in Lordstown, Ohio (hence the name) in order to speed its production process.
Now, the startup plans to follow in the footsteps of EV companies such as Nikola Corp. (NASDAQ: NKLA) and Fisker Inc. – both of which sidestepped the traditional IPO path and merged with SPACs to go public instead.
As part of its merger with DiamondPeak, Lordstown will receive a total of $675 million in financing at a $1.6 billion valuation from Wellington Management, Fidelity Inc. (NYSE: FNF), BlackRock Inc. (NYSE: BLK), and General Motors.
According to Monday’s press release, the funds will be used for the development and commercialization of Lordstown’s all-electric pickup, called the Lordstown Endurance – starting at $52,500.
Since the prototype for the pickup truck was revealed on June 25, the company said it has already received more than 27,000 pre-orders mostly from commercial fleet customers. That equates to more than $1.4 billion in potential revenue.
With both pickup truck and electric vehicle sales trending upward in the US, Lordstown Motors believes it can generate $118 million in revenue next year and $1.7 billion in revenue in its first full year of sales in 2022.
It expects to be able to make about 31,000 trucks in 2022, with production more or less doubling each year after that. The startup also says there is “potential to enter the SUV market over time.”
The new company will trade on the Nasdaq stock exchange under the ticker “RIDE,” and most likely be available for the public to trade later this year.
As always, I’ll keep you updated just before the new stock officially goes public. That’s when we’ll determine if the company is overvalued or undervalued and whether to buy or avoid the stock.
