The best sector for investors to be in this year has no doubt been the EV space. From Tesla to NIO to Workhorse Group to Hyliion and Nikola before the Hindenburg hit job and Fisker, these stocks have delivered triple-digit gains for our readers and subscribers. We have covered them all before the big run and focused on Workhorse’s 10% stake in Lordstown Motors as a smart way to play the Lordstown merger with DPHC stock.
Now, we are doing a deep dive on Lordstown Motors and why we believe the rally is set to continue. In this article, we take a look at the fundamentals of Lordstown Motors and why it belongs in every EV investor’s portfolio.
Lordstown Motors Corp. is an Ohio-based original equipment manufacturer of light-duty fleet vehicles, founded with the purpose of transforming Ohio’s Mahoning Valley and Lordstown, Ohio, into the epicenter of electric-vehicle manufacturing. The company owns the Lordstown Assembly Plant where it plans to build the Lordstown Endurance, believed to be the world’s first fully-electric pickup truck designed to serve the commercial fleet market.
DiamondPeak is a special purpose acquisition company formed for the purpose of effecting a merger, stock exchange, acquisition, reorganization, or similar business combination with one or more businesses. DiamondPeak is sponsored by DiamondPeak Sponsor LLC, which is owned by affiliates of David T. Hamamoto and the principals of Silverpeak, an alternative investment management firm.
Lordstown Motors DPHC Deal
The business combination values Lordstown at an implied $1.6 billion pro forma equity value, at the $10.00 per share PIPE price and assuming minimal redemptions by DiamondPeak stockholders. The boards of directors of both DiamondPeak and Lordstown have unanimously approved the proposed transaction, which is expected to be completed in the fourth quarter of 2020.
The transaction includes a $500 million fully committed PIPE, which includes $75 million of investments by General Motors in addition to investments from institutional investors, including Fidelity Management & Research Company LLC, Wellington Management Company LLP, Federated Hermes Kaufmann Small Cap Fund, and funds and accounts managed by BlackRock, among others. Approximately $675 million of gross proceeds that are expected from the transaction will be used to fund the production of the Endurance and its innovative in-wheel electric hub motor design.
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.”
Lordstown Motors Endurance
Endurance is Lordstown Motors’ all-electric full-size pickup truck that delivers the equivalent of 75 miles per gallon and has been systematically engineered and competitively priced specifically for the large commercial fleet market, which includes companies in manufacturing, contracting, utilities, transportation and delivery, and agriculture, among others. Since its unveiling, the Endurance has been met with $1.4 billion of pre-orders.
To manufacture the Endurance, Lordstown Motors purchased the former General Motors Lordstown Assembly Plant, a 6.2 million square foot facility estimated to be capable of producing in excess of 600,000 electric vehicles annually. Lordstown is believed to be one of the first electric vehicle manufacturers to acquire a near production-ready plant. The Lordstown complex provides Lordstown with critical flexibility and line-of-sight to production, immediate access to a well-trained and highly capable workforce in Ohio’s Mahoning Valley, and positions Lordstown to be first to market.
President Trump has Tweeted several times about the Lordstown Motors GM plant.
Furthermore, VP Mike Pence was at the unveiling of the new Endurance in June.
Lordstown Motors Management Team
What is also impressive about Lordstown Motors is the management team that Steve Burns, Founder and Chief Executive Officer of Lordstown, has put together. All are well-known in the automotive industry and include former Tesla executives.
Comparison To Nikola
We have been bullish on Nikola, but we are holding off on addressing the Hindenburg report until the company properly addresses the allegations. We cannot defend Nikola until we have confirmation that from the board of directors that all allegations are false.
With that being said, we believe some of the money that has been coming out of Nikola and going into DPHC stock. Here’s why:
- Steve Burns is a visionary like Elon Musk without the baggage of Trevor Milton. Even if the allegations by Hindenburg are disproven, it will be hard for Trevor Milton to retain credibility.
- Lordstown Motors already has a manufacturing plant, whereas Nikola and Fisker do not.
- Current valuation is around $4.8 billion compared to Nikola at $14 billion. There’s still a lot more room for shares to run.
DPHC, soon to be RIDE, is a smart EV play for investors to buy and hold. We still haven’t seen the move that is coming like we did in NKLA and SHLL. We will get this type of move once the merger closes. What that price will be is anyone’s guess, but if we had to guess, it will be anywhere from $30 to $100 a share. This will come on the back of new investors jumping in and the shorts covering, as they have shorted almost 6% of the float. A short squeeze is coming. Buckle up and enjoy the RIDE!
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in NASDAQ:DPHC or any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article. Insider Financial is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This article is not a solicitation or recommendation to buy, sell, or hold securities. This article is meant for informational and educational purposes only and does not provide investment advice.