The Lordstown Motors Corp. Endurance electrical pickup truck is displayed throughout an unveiling occasion in Lordstown, Ohio, U.S., on Thursday, June 25, 2020.
Matthew Hatcher | Bloomberg | Getty Photos
Shares of DiamondPeak Holdings, a particular goal acquisition firm, jumped 21% on Monday after the corporate introduced that it’ll merge with electrical car firm Lordstown Motors. The mixed firm will commerce on the Nasdaq underneath the brand new image “RIDE.”
The deal represents two areas of explicit investor curiosity this yr: particular goal acquisition corporations (SPACs), in addition to electrical car start-ups.
SPACs are also called blank-check corporations, since traders fork over cash with out figuring out when, and even what for, their capital will likely be used. As soon as the SPAC goes public, the objective is then for it to accumulate or merge with a personal firm, thereby taking it public.
Amid market uncertainty and a lackluster IPO market, SPACs are on tempo to boost a report quantity of capital this yr, in accordance with information from Dealogic.
The merger between DiamondPeak and Lordstown Motors, which is anticipated to shut within the fourth quarter of 2020, represents no less than the third deal between a SPAC and an electrical car start-up this yr.
In June Nikola Company started buying and selling after a reverse merger with VectoIQ, and in July electrical car start-up Fisker mentioned it will merge with Spartan Power Acquisition, a particular goal acquisition firm backed by Apollo International Administration. Investor enthusiasm for the EV area comes amid a greater than 240% bounce in shares of Tesla this yr.
However whereas traders initially piled into Nikola — sending shares up 150% within the first 4 days of buying and selling — a few of that enthusiasm has since cooled, and on Friday the inventory closed at $30.
With increasingly more gamers coming into the area — start-up EV maker Rivian additionally introduced in July that it raised $2.5 billion in recent financing — competitors is rising. Moreover, Tesla’s previous supply points underline simply how tough it may be to deliver an electrical car to market.
In line with Monday’s press launch, $675 million of anticipated gross proceeds will likely be used for the event and commercialization of Lordstown’s all-electric pickup, referred to as the Lordstown Endurance.
Because the prototype for the pickup truck was revealed on June 25, the corporate mentioned it has obtained greater than 27,000 pre-orders, which equates to greater than $1.four billion in potential income. The majority of the reservations are from business fleet clients. In November 2019 Lordstown Motors bought a 6.2 million sq. foot former Common Motors meeting plant with a purpose to velocity its manufacturing course of.
The professional forma implied fairness worth of the merged firm is roughly $1.6 billion, which incorporates $75 million in investments from Common Motors in addition to commitments from institutional traders together with Constancy Administration.
DiamondPeak raised $250 million in its IPO in March 2019, with the corporate initially trying to goal a “enterprise with an actual property associated part.”
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