Electric-pickup start-up Lordstown Motors is going public: The Ohio-based company said today it has agreed to a merger with DiamondPeak Holdings (DPHC), a special-purpose acquisition company (or SPAC), in a deal that will provide it with the funding needed to put its electric pickup truck into production.

Lordstown, which owns a former General Motors (GM -1.04%) factory and counts GM among its investors, is planning to have its Endurance pickup truck in production by the end of 2021.

Here's what we know about the deal. 

Steve Burns standing next to the Endurance pickup on the factory floor.

Lordstown Motors CEO Steve Burns, shown with the company's electric Endurance pickup truck at its factory in Lordstown, Ohio. Image source: Lordstown Motors.

About the deal that will take Lordstown Motors public

If you followed the deal that took electric-semi start-up Nikola (NKLA -3.73%) public in early June, the basic outline of the Lordstown deal will look familiar. 

  • Lordstown will merge with DiamondPeak. 
  • The merged company will be named "Lordstown Motors," and the former DiamondPeak stock will trade under the new symbol "RIDE." 
  • The transaction includes a $500 million PIPE (for "private investment in public equity"), fully funded by investors including General Motors, Fidelity Investments, Wellington Management, and accounts managed by BlackRock.
  • GM's $75 million investment includes "in-kind contributions" that have already been made.
  • Lordstown will receive about $675 million in gross proceeds, enough to get the Endurance into production.
  • The pro forma equity value of the combined company is about $1.6 billion. 

The transaction is expected to close by the end of the fourth quarter.

Who is Lordstown Motors?

Readers may recall that Lordstown Motors is the company that took possession of the former GM factory in Lordstown, Ohio. 

In its heyday, GM's Lordstown plant employed about 10,000 workers. But GM idled the factory in 2019 amid slumping demand for its product, the compact Chevrolet Cruze sedan -- a decision that led to some strong expressions of concern from President Trump and that was a factor in the United Auto Workers' strike against GM later that year. 

GM resolved the issue by selling the plant to Lordstown Motors at a value price, and by offering some assistance to the new company as it worked to get its electric pickup ready for production. That factory gives Lordstown a notable advantage over rivals including Nikola, which has an electric pickup prototype, but as of now, no place to build it. 

The Endurance, unveiled in June, has already drawn interest from commercial-fleet operators. Lordstown said that it has over 27,000 pre-orders for the truck, representing more than $1.4 billion in potential revenue. 

Lordstown is led by Steve Burns, the former CEO of electric-delivery-van maker Workhorse Group (WKHS -9.61%). 

How Workhorse fits into this deal

Workhorse didn't just give Lordstown its CEO. It also licensed some of its designs and technology to the company. In exchange, Workhorse received a 10% stake in Lordstown, along with an agreement that protects that stake from dilution for two years. Workhorse is also entitled to a 1% fee on all debt and equity raised to fund Lordstown during that two-year period. 

Simply put, while Workhorse isn't named as an investor in the deal with DiamondPeak, it stands to benefit: Its 10% stake will be worth about $160 million at the post-merger company's pro forma $1.6 billion valuation, and possibly much more as Lordstown ramps up to production next year. 

Who is DiamondPeak Holdings?

We don't know a whole lot about DiamondPeak yet. We do know that it's a SPAC formed by the energy-investing group at Silverpeak Capital, a New York-based private equity firm; and David Hamamoto, a serial entrepreneur with a long track record of investments in real estate and healthcare companies. 

Hamamoto is DiamondPeak's CEO; he will join the combined company's board of directors. In a statement on Monday, Hamamoto said that DiamondPeak evaluated "hundreds of companies" over the last year before settling on Lordstown Motors. 

The former GM plant in Lordstown, Ohio, viewed from the air.

Lordstown Motors' factory, a former GM plant, gives it a significant head start on getting the Endurance into production. Image source: Lordstown Motors.

What should investors make of this?

My take is that while any vehicle start-up is a risky investment, Lordstown is a no-nonsense company with a promising product. The Endurance is a sturdy four-wheel-drive pickup with some innovative features, notably a complete motor unit at each wheel. That should simplify manufacturing, lowering costs and maintenance, which is important to fleet customers.

What's the company worth? It's hard to say right now, but we'll have more financial details once DiamondPeak publishes the proxy asking its shareholders to vote for the merger later this year. 

In the meantime, if you're one of the many auto investors watching the electric-vehicle-start-up space with interest, this is a credible effort that deserves a spot on your watch list. Stay tuned.