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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: Initial Statement of Beneficial Ownership (3) 11/23/2020 05:04:36 PM
DPHC News: Statement of Ownership (sc 13g) 11/18/2020 04:14:59 PM
DPHC News: Amended Current Report Filing (8-k/a) 11/16/2020 05:17:42 PM
DPHC News: Current Report Filing (8-k) 11/16/2020 08:03:58 AM
DPHC News: Securities Registration Statement (s-1) 11/12/2020 05:30:52 PM
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
#410   Dear lord! This is just like $SHLL/$HYLN.... bcapps66 10/28/20 10:11:56 AM
#409   On my Schwab pages this morning, everything looks normal. lumpina 10/27/20 09:20:47 AM
#408   yes DHPC shareholders accepted everything, trading as RIDE uksausage 10/26/20 05:03:40 PM
#407   trying in fer change mick 10/26/20 04:03:47 PM
#406   didn't this close Friday why the end of jsc52033 10/26/20 03:49:12 PM
#405   $ride About the deal that will take Lordstown mick 10/26/20 01:39:20 PM
#404   RIDE Lordstown, which owns a former General Motors mick 10/26/20 01:38:05 PM
#403   big camping grounds !!!!! $RIDE [-chart]g.foolcdn.com/image/?url=https%3A//g.foo mick 10/26/20 01:33:48 PM
#402   $RIDE Bid: 19.60 Ask: 19.68 Last: 19.68 Chg mick 10/26/20 01:32:00 PM
#401   $RIDE reading i don't like the name ride mick 10/26/20 01:31:05 PM
#400   RIDE 19.56 +1.35 +7.39% USD 1:24PM EDT 3.374M mick 10/26/20 01:28:32 PM
#399   Yes, But I'm still not seeing anything in Dennisb68 10/26/20 01:04:15 PM
#398   Come on JSC: you know why. lumpina 10/26/20 12:47:00 PM
#397   This stock is now trading as RIDE. Rock_nj 10/26/20 12:22:53 PM
#396   Not seeing any gain or loss, or % Dennisb68 10/26/20 11:51:11 AM
#395   A number of source s of income for brokers.. uksausage 10/26/20 11:17:33 AM
#394   I still can't figure out how these brokers jsc52033 10/26/20 10:47:08 AM
#393   TD Ameritrade has RIDE - showing me with uksausage 10/26/20 10:40:07 AM
#392   Thanks. I'll wait a couple of days lumpina 10/26/20 10:11:31 AM
#391   right it is held in the acct but jsc52033 10/26/20 09:50:10 AM
#390   likewise at Schwab: BUT, it is not lumpina 10/26/20 09:43:54 AM
#389   Mick please change the board to RIDE the jsc52033 10/26/20 09:42:33 AM
#388   yes but the brokers may not have the jsc52033 10/26/20 09:41:16 AM
#387   Do our shares of DPHC automatically go into lumpina 10/26/20 09:37:22 AM
#386   That would be great Golden_Cross 10/25/20 08:42:10 PM
#385   DiamondPeak Holdings (DPHC) mick 10/25/20 06:41:32 PM
#384   RIDE .. LORDSTOWN IS A BUY AND IS xray168 10/25/20 06:37:32 PM
#383   I am holding for next year also DanT09... Golden_Cross 10/25/20 10:46:51 AM
#382   I hope this turns around again. I can DanT09 10/25/20 10:40:33 AM
#381   $DPHC starts trading on Monday as $RIDE Golden_Cross 10/24/20 05:01:31 AM
#380   I will patiently wait until after the 26th bcapps66 10/23/20 06:24:46 PM
#379   Yes i mentioned that and added 2,000 today xray168 10/23/20 02:56:35 PM
#378   warrannts aare now trading at a discount a jsc52033 10/23/20 02:53:21 PM
#377   yes its right on the support ne now. jsc52033 10/23/20 02:51:03 PM
#376   theres pretty good support around here lets hope uksausage 10/23/20 02:32:43 PM
#375   looks like its headed to the gap jsc52033 10/23/20 01:20:34 PM
#374   The better entry point is what I'm betting on. bcapps66 10/22/20 03:28:23 PM
#373   yes but the warrants now are at a jsc52033 10/22/20 02:38:27 PM
#372   Bear in mind that each public warrant (1 xray168 10/22/20 02:22:44 PM
#371   word is hitting the street.... https://wccftech.com/lordstown-and-diamondpeak-ha texastornado 10/22/20 12:52:37 PM
#370   I'm hodling and buying more! texastornado 10/22/20 11:05:38 AM
#369   Judging by today's action, I now have to bcapps66 10/22/20 11:03:41 AM
#368   Thank you howardriggin 10/22/20 09:45:22 AM
#367   Time will tell ;) bcapps66 10/22/20 09:33:26 AM
#366   the bad press was a short blogger. texastornado 10/22/20 08:21:14 AM
#365   no. it will be announced today and then texastornado 10/22/20 08:20:16 AM
#364   I disagree. This is priced well below texastornado 10/22/20 08:19:32 AM
#363   I would be happier at $23.Cramer said $20 whyzgi 10/22/20 01:10:14 AM
#362   They had some bad press last week I DanT09 10/21/20 06:27:01 PM
#361   Does the name change happen before market opens tomorrow? howardriggin 10/21/20 05:55:11 PM
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