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First Look: The SPAC Deal That Will Take Electric-Pickup Start-Up Lordstown Motors Public

DiamondPeak Holdings has agreed to merge with Lordstown. Here's what we know.

https://www.fool.com/investing/2020/08/03/first-look-the-spac-deal-that-will-take-electric-p.aspx?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article
 

Electric-pickup start-up Lordstown Motors is going public: The Ohio-based company said today it has agreed to a merger with 
DiamondPeak Holdings (NASDAQ:DPHC), a special-purpose acquisition company (or SPAC), in a deal that will provide it with the funding needed to put its electric pickup truck into production.

Lordstown, which owns a former General Motors (NYSE:GM) factory and counts GM among its investors, is planning to have its Endurance pickup truck in production by the end of 2021.

Here's what we know about the deal. 

 
[-chart]g.foolcdn.com/image/?url=https%3A//g.foolcdn.com/editorial/images/585469/lordstown-endurance-reveal-june-2020.jpg&w=2000&op=resize[/chart]
 

About the deal that will take Lordstown Motors public

If you followed the deal that took electric-semi start-up Nikola (NASDAQ:NKLA) public in early June, the basic outline of the Lordstown deal will look familiar. 

  • Lordstown will merge with DiamondPeak. 
    The merged company will be named "Lordstown Motors," and the former DiamondPeak stock will trade under the new symbol "RIDE." 
    The transaction includes a $500 million PIPE (for "private investment in public equity"), fully funded by investors including General Motors,
    Fidelity Investments, Wellington Management, and accounts managed by BlackRock.
    GM's $75 million investment includes "in-kind contributions" that have already been made.
    Lordstown will receive about $675 million in gross proceeds, enough to get the Endurance into production.
    The pro forma equity value of the combined company is about $1.6 billion. 

The transaction is expected to close by the end of the fourth quarter.

Who is Lordstown Motors?

Readers may recall that Lordstown Motors is the company that took possession of the former GM factory in Lordstown, Ohio. 

In its heyday, GM's Lordstown plant employed about 10,000 workers. But GM idled the factory in 2019 amid slumping demand for its product,
the compact Chevrolet Cruze sedan -- a decision that led to some strong expressions of concern from President Trump
and that was a factor in the United Auto Workers' strike against GM later that year. 

GM resolved the issue by selling the plant to Lordstown Motors at a value price,
and by offering some assistance to the new company as it worked to get its electric pickup ready for production.
That factory gives Lordstown a notable advantage over rivals including Nikola, which has an electric pickup prototype, but as of now, no place to build it. 

The Endurance, unveiled in June, has already drawn interest from commercial-fleet operators.
Lordstown said that it has over 27,000 pre-orders for the truck, representing more than $1.4 billion in potential revenue. 

Lordstown is led by Steve Burns, the former CEO of electric-delivery-van maker Workhorse Group (NASDAQ:WKHS). 

How Workhorse fits into this deal

Workhorse didn't just give Lordstown its CEO. It also licensed some of its designs and technology to the company. In exchange,
Workhorse received a 10% stake in Lordstown, along with an agreement that protects that stake from dilution for two years.
Workhorse is also entitled to a 1% fee on all debt and equity raised to fund Lordstown during that two-year period. 

Simply put, while Workhorse isn't named as an investor in the deal with DiamondPeak, it stands to benefit:
10% stake will be worth about $160 million at the post-merger company's pro forma $1.6 billion valuation,
and possibly much more as Lordstown ramps up to production next year. 

Who is DiamondPeak Holdings?

We don't know a whole lot about DiamondPeak yet. We do know that it's a SPAC formed by the energy-investing group at Silverpeak Capital,
a New York-based private equity firm; and David Hamamoto, a serial entrepreneur with a long track record of investments in real estate and healthcare companies. 

Hamamoto is DiamondPeak's CEO; he will join the combined company's board of directors. In a statement on Monday,
Hamamoto said that DiamondPeak evaluated "hundreds of companies" over the last year before settling on Lordstown Motors. 

[-chart]g.foolcdn.com/image/?url=https%3A//g.foolcdn.com/editorial/images/585469/lmc-complex_march-2020_003.jpg&w=2000&op=resize[/chart]
 

 

What should investors make of this?

My take is that while any vehicle start-up is a risky investment, Lordstown is a no-nonsense company with a promising product.
The Endurance is a sturdy four-wheel-drive pickup with some innovative features, notably a complete motor unit at each wheel.
That should simplify manufacturing, lowering costs and maintenance, which is important to fleet customers.

What's the company worth? It's hard to say right now, but we'll have more financial details once
DiamondPeak publishes the proxy asking its shareholders to vote for the merger later this year. 

In the meantime, if you're one of the many auto investors watching the electric-vehicle-start-up space with interest,
this is a credible effort that deserves a spot on your watch list. Stay tuned.

John Rosevear owns shares of General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


Shs Float 27.00M
 
Shs Outstand 35.00M
 
Short Float 0.09%
 
Insider Own 3.57%
 
Inst Own 65.80%
 
Debt/Eq  NO DEBT 0.00
Book/sh 7.87
52W Range 9.50 - 10.99


[-chart]finviz.com/chart.ashx?t=DPHC&ty=c&ta=1&p=d&s=l[/chart]
 



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DPHC News: Proxy Soliciting Materials (revised) (prer14a) 09/21/2020 07:00:34 AM
DPHC News: Current Report Filing (8-k) 09/18/2020 06:10:24 AM
DPHC News: Additional Proxy Soliciting Materials (definitive) (defa14a) 09/18/2020 06:05:37 AM
DPHC News: Quarterly Report (10-q) 08/13/2020 04:09:57 PM
DPHC News: Additional Proxy Soliciting Materials (definitive) (defa14a) 08/05/2020 06:01:38 AM
PostSubject
#220  Sticky Note DPHC Lordstown Investor Presentation Golden_Cross 09/09/20 10:19:33 PM
#5  Sticky Note $DPHC best New EV play without any drama. FALCON 1 08/03/20 10:50:33 AM
#301   The SPAC stocks did take a steep dip Rock_nj 09/26/20 12:21:04 PM
#300   Sept 24 article Re SEC concern of Spaculator 09/26/20 09:06:03 AM
#299   DiamondPeak Holdings (DPHC) mick 09/25/20 07:39:16 PM
#298   Picking up some 19's today sure felt nice. texastornado 09/24/20 09:47:01 PM
#297   Don’t think that wack job Governors law will howardriggin 09/24/20 07:09:57 PM
#296   jumped out yesterday and reconsidering right now. wait? randal21 09/24/20 02:33:11 PM
#295   California banning new gasoline cars by 2035 article Spaculator 09/23/20 10:20:47 PM
#294   California just banned gasoline powered cars by 2035. Rock_nj 09/23/20 10:06:41 PM
#293   Makes Nikola look like a Tonga truck. And. howardriggin 09/23/20 08:16:09 PM
#292   Great article and pictures. So far ahead of uksausage 09/23/20 06:15:02 PM
#291   https://www.dispatch.com/story/business/manufacturing/2020/09/23/lordstown- daguk 09/23/20 05:12:47 PM
#290   Cramer Weighs In On Diamondpeak, Caesars Entertainment And toolmaker1047 09/23/20 04:03:20 PM
#289   ignore the dip...and check out some REAL good texastornado 09/23/20 03:55:44 PM
#288   where and what news tia jsc52033 09/23/20 03:35:49 PM
#287   I was thinking the same thing about Cramer toolmaker1047 09/23/20 02:17:31 PM
#286   I’m thinking that Cramer did some unnecessary damage Spaculator 09/23/20 01:47:45 PM
#285   DPHCW is now undervalued by about $6 per Rock_nj 09/22/20 06:33:29 AM
#284   $30? $31? We have a monster on texastornado 09/21/20 03:56:40 PM
#283   Great info out today! Things are going even texastornado 09/21/20 02:23:34 PM
#282   DPHC shareholder meeting record date today 9/21/20. Rock_nj 09/21/20 12:46:14 PM
#281   Agreed Rock_nj Golden_Cross 09/20/20 08:25:04 AM
#280   It seems like DPHC is basing at the Rock_nj 09/20/20 08:07:29 AM
#279   $30+ run coming Golden_Cross 09/20/20 06:11:57 AM
#278   PIC Rock_nj 09/19/20 09:57:00 PM
#277   what is the ticker symbol tia jsc52033 09/19/20 02:57:03 PM
#276   The DPHC / RIDE warrants are still undervalued Rock_nj 09/19/20 06:55:26 AM
#275   Thank you for this!!! Bought some as a Spaculator 09/18/20 08:00:18 PM
#274   Yeah I grabbed 1000 warrants this morning. Need EquityMonster83 09/18/20 01:50:59 PM
#273   Speaking of Lordstown > XL Fleet, a Commercial crudeoil24 09/18/20 01:39:45 PM
#272   DPHC is building a new base here for Rock_nj 09/17/20 11:48:45 AM
#271   ?$DPHC looking for a job? 79 jobs available EquityMonster83 09/16/20 11:18:55 PM
#270   agreed. I'll be patient and make enough texastornado 09/16/20 08:29:58 PM
#269   that would be nice but that might be chuck29 09/16/20 08:26:21 PM
#268   Im in for the SUV when it comes out texastornado 09/16/20 08:22:53 PM
#267   pence also said hes buying a endurance truck chuck29 09/16/20 08:21:28 PM
#266   VP Pence mentioned Lordstown today! Awesome plug! texastornado 09/16/20 07:09:38 PM
#265   $DPHC really good interview with CEO of Lordstown. EquityMonster83 09/16/20 12:14:52 AM
#264   Thanks , what will the new share structure theman2002345 09/15/20 08:59:11 PM
#263   Yes and completion is expected by the end Rock_nj 09/15/20 08:58:14 PM
#262   So basically when the merger is complete our theman2002345 09/15/20 05:57:31 PM
#261   EXCELLENT interview with Lordstown Motors CEO. Top texastornado 09/15/20 02:16:31 PM
#260   don't speak too soon...... kanonman 09/15/20 11:23:53 AM
#259   well this was overdue kanonman 09/15/20 10:00:17 AM
#258   Very positive news for DPHC. crudeoil24 09/15/20 07:19:28 AM
#257   $DPHC From NOACA meeting today. During the meeting, EquityMonster83 09/14/20 09:28:40 PM
#256   quick kiss to $30... then down for a texastornado 09/14/20 01:17:41 PM
#255   DPHCW is still considerably undervalued compared to the commons. Rock_nj 09/14/20 12:58:41 PM
#254   it hit 30. wow kanonman 09/14/20 12:54:14 PM
#253   congrats longs, I missed this spac play ~ $treet $inatra 09/14/20 12:38:36 PM
#252   here comes 30 kanonman 09/14/20 12:34:55 PM
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