Fisker is also expected to go public through a merger with a company backed by Apollo Global
Shares of special purpose acquisition company, or SPAC, DiamondPeak Holdings (DPHC) jumped on Monday after the company announced that it is merging with Lordstown Motors, with the combined entity to trade on the Nasdaq under the symbol "RIDE." The deal mirrors that of Nikola (NKLA), the electric vehicle maker that went public in June through a reverse merger with VectoIQ, another SPAC.
LORDSTOWN SPAC MERGER: Lordstown Motors and DiamondPeak Holdings announced they have entered into a definitive agreement for a business combination that would result in Lordstown becoming a publicly listed company. Upon closing of the transaction, the combined company will be named Lordstown Motors Corp. and is expected to remain listed on the NASDAQ and trade under the new ticker symbol, "RIDE." The business combination values Lordstown at an implied $1.6b pro forma equity value, at the $10.00 per share PIPE price and assuming minimal redemptions by DiamondPeak stockholders. The transaction is expected to close in the fourth quarter and includes an investment of $75M from General Motors (GM).
"That should get us all the way to the finish line," Lordstown Motors founder and Chief Executive Officer Steve Burns said in a phone interview with Bloomberg's David Welch and Siddharth Philip. "It will get us into production and also help bring new models quicker than we could have." The company purchased the Lordstown factory after GM decided to close the plant. Burns said he has been staffing the factory with contractors while getting ready to start production but won’t begin replacing them with full-time workers. He said he will need 600 production employees and as many as 400 engineers to get the old Lordstown plant running, according to Bloomberg’s report. His plan is to build 20,000 truck in the first full year of production. The company has a letter of intent from potential customers for 27,000 vehicles, he said.
Commenting on the news, Roth Capital analyst Craig Irwin said he sees Lordstown's SPAC deal driving value for Workhorse (WKHS), which owns a small stake in the former. Workhorse owns 9.99% of Lordstown Motors and the cash value of a successful launch of the Endurance all-electric truck is worth over $100M in royalties and fees to Workhorse, he contended. Irwin has a Buy rating and a price target of $27 on Workhorse shares.
PEERS GO PUBLIC: Lordstown is not the only EV maker to go public in recent months via a SPAC reverse merger. Nikola (NKLA) did the same back in June, when it announced the completion of its business combination with VectoIQ, a publicly-traded special purpose acquisition company.
Ahead of the company's quarterly results on August 4, Deutsche Bank analyst Emmanuel Rosner added Nikola to the firm's short-term "Catalyst Call Buy List." With limited focus on near-term earnings absent any revenue, Nikola could potentially use its earnings call to provide "highly-anticipated business updates," including naming customers for its BEV truck, a commercial partner for its hydrogen stations, a manufacturing partner for the Badger pickup, as well as an updated Badger reservations count, Rosner contended. Management had indicated it would disclose these sometime in the second half of 2020. Rosner pointed out Nikola is down 40% since July 20 when shares from early investors from warrants and the PIPE became tradeable. However, this new supply of shares has been largely absorbed and the stock price has stabilized in most recent session, he contended. The analyst sees 10%-20% near-term upside in the stock despite keeping a Hold rating on Nikola.
Meanwhile, electric vehicle start-up Fisker announced last month that it would merge with Spartan Energy Acquisition, a special purpose acquisition company sponsored by an affiliate of Apollo Global Management (APO). The deal is expected to close in the fourth quarter.
Choosing the traditional IPO approach, Li Auto (LI) opened on July 30 at $15.50. The company designs, develops, manufactures, and sells premium smart electric SUVs, stating it was "the first to successfully commercialize extended-range electric vehicles in China."
PRICE ACTION: In late morning trading, shares of DiamondPeak Holdings have jumped 14% to $11.67, while Nikola's stock has gained about 9% to $32.67. Meanwhile, Tesla (TSLA) shares have jumped over 240% this year as investor enthusiasm for the EV space continues.