What happened

Shares of electric-van maker Workhorse Group (WKHS 22.49%) were rising on Monday, after a Wall Street analyst speculated that a deal could be in the works for electric-pickup start-up Lordstown Motors, in which Workhorse owns a stake.

As of 2 p.m. EDT, Workhorse's shares were up about 10.8% from Friday's closing price.

So what

In a note on Monday morning, Roth Capital analyst Craig Irwin wrote that he sees a "rising probability" that a special purpose acquisition company, or SPAC, could take over Lordstown Motors in a deal similar to the one that effectively took electric big-rig maker Nikola (NKLA -4.65%) public in early June.

For Workhorse, such a deal could yield a nice windfall, Irwin wrote. Workhorse owns 10% of Lordstown Motors with two years of anti-dilution protection, received in exchange for design and technology licenses last year. Workhorse is also entitled to a 1% fee on all debt and equity raised to fund Lordstown during that two-year period, Irwin noted. 

The prototype Lordstown Endurance, an electric pickup truck.

Lordstown's electric pickup, called the Endurance, incorporates designs and technology licensed from Workhorse Group. Image source: Lordstown Motors.

That 1% fee could be significant even if a SPAC deal doesn't happen soon, as Irwin thinks that Lordstown is in a strong position to raise capital. While the company doesn't yet have its Endurance pickup in production, it does have ownership of the former General Motors (GM 0.80%) assembly plant in Lordstown, Ohio, a large and modern facility. 

So what's it worth to Workhorse? Irwin thinks that the cash value to Workhorse of a Nikola-type deal for Lordstown would be over $100 million, and Workhorse's equity in Lordstown could be worth between $200 million and $500 million. 

Irwin maintained his previous buy rating on Workhorse's stock and reiterated the $27 price target from his note on July 13. 

Now what

Auto investors should be clear that this is one analyst's speculation; as far as the public knows, there's no deal in the works for Lordstown. But given the other SPAC deals we've seen in this space over the last several weeks, including deals involving hybrid-semi powertrain maker Hyliion, electric-SUV start-up Fisker, and driver-assist sensor maker Velodyne Lidar, a similar deal for Lordstown wouldn't be surprising. 

If there is a deal in the works, we might find out more when Workhorse reports its second-quarter earnings results next month. Stay tuned.