Lordstown Motors has agreed to go public through a merger with blank-check company DiamondPeak Holdings in a deal that gives the electric pickup start-up a pro forma equity value of $1.6 billion, the companies said on Monday.
The combined company will be called Lordstown Motors Corp following the closure of the deal in the fourth quarter and will trade on the Nasdaq under the ticker symbol RIDE, the companies said.
"Lordstown ... has a transformational product and business plan in what are two of the most valuable areas of focus and tremendous opportunity in the auto sector -- electric vehicles and light-duty trucks," DiamondPeak CEO David Hamamoto said on a conference call. "Lordstown has attracted a clear lane of customers in the commercial fleet segment of the market."
A blank-check company is a shell company that raises money through an initial public offering to buy an operating entity, typically within two years.
Several EV developers such as Nikola Corp. and Fisker have either gone public or are planning to list their shares through mergers with blank-check companies this year.
Lordstown has been working on a new full-size electric pickup truck called Endurance and last year hired Rich Schmidt, a former director of manufacturing at Tesla Inc., as chief production officer.
The company said the truck is aimed at the U.S. commercial fleet market, with initial production expected in the second half of 2021.
Lordstown expects to receive about $675 million of gross proceeds from the deal and will use the funds for the production of the new truck, which has secured $1.4 billion worth of pre-orders, the company said.
“That should get us all the way to the finish line,” Lordstown Motors founder and CEO Steve Burns said in a phone interview with Bloomberg. “It will get us into production and also help bring new models quicker than we could have.”
The transaction includes an investment of $75 million from GM. GM’s stake will be significant but less than 10 percent, Burns said.
DiamondPeak is controlled by Hamamoto, a former executive at Northstar Realty, and Mark A. Walsh, a former real estate banker at Lehman Brothers and now a partner at investment fund Silverpeak. Shares of DiamondPeak rose as much as 17 percent to $11.95 as of 9:32 a.m. in New York. Workhorse Group Inc., which owns a small stake in Lordstown Motors, rose as much as 5.7 percent, and Nikola shares were up as much as 6.3 percent.
Lordstown Motors purchased the Lordstown, Ohio, factory after General Motors decided to close the plant, which was founded in 1966. Its closure was a liability for U.S. President Donald Trump, who a year earlier went so far as to discourage rally-goers from selling their homes because of all the jobs he would bring back to the area.
Burns said he has been staffing the plant 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.
When GM made the Chevrolet Cruze compact in the plant, it employed about 3,000 workers on several shifts. It gradually downsized output as demand for small cars declined and closed the plant in 2019.
Burns' 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.
The transaction also includes funding from Fidelity Management & Research Co., Wellington Management Co., Federated Hermes Kaufmann Small Cap Fund, and funds and accounts managed by BlackRock Inc., among others. Goldman Sachs served as the exclusive finance adviser to DiamondPeak, with Deutsche Bank serving as an additional capital markets adviser.
Reuters and Bloomberg contributed to this report.