Please ensure Javascript is enabled for purposes of website accessibility

Why DiamondPeak Holdings' Stock Is Charging Higher Today

By John Rosevear – Aug 3, 2020 at 11:02AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It just became the latest SPAC to join the electric-vehicle party.

What happened

Shares of DiamondPeak Holdings (DPHC) were surging on Monday morning after the company announced that it will merge with electric-pickup start-up Lordstown Motors in a deal that will take Lordstown public.

As of 10:30 a.m. EDT today, DiamondPeak's shares were up about 11.1% from Friday's closing price.

So what 

DiamondPeak is a special-purpose acquisition company, or SPAC, a type of company created specifically to acquire (or merge) with one or more other companies. SPACs are sometimes referred to as "shell companies" and generally have no ongoing revenue-producing businesses of their own. 

In this case, DiamondPeak plans to merge with Lordstown Motors, a start-up that plans to begin building an electric pickup truck in a former General Motors (GM -6.16%) factory late next year. The company will be renamed Lordstown Motors and will trade under the ticker RIDE after the merger closes in the fourth quarter of 2020, if all goes according to plan. 

A silver Lordstown Endurance, a sleek electric pickup truck, in the company's factory in Lordstown, Ohio.

Lordstown Motors revealed its electric pickup, called the Endurance, in June. It has over 27,000 orders for the truck. Image source: Lordstown Motors.

As part of the deal, Lordstown will get a cash infusion of over $600 million, including private investments from Fidelity Investments, Wellington Management, and GM. Lordstown expects the cash to be enough to get its truck into production on schedule. 

Now what

If you're thinking that this deal closely follows the template of the deal that took electric-semi maker Nikola (NKLA -9.26%) public in June, you're right. Nikola's shares soared in the weeks following that deal, but have since fallen back considerably from their peak as investors have realized that Nikola has some distance to go before it begins generating revenue. 

On paper at least, Lordstown looks like less of a moonshot than Nikola, which just began construction of its future factory. Lordstown has the former GM factory, its truck is a practical product with features that will appeal to commercial-fleet operators, it has received some help from GM and from electric delivery-van maker Workhorse Group (WKHS -9.62%) (which owns 10% of Lordstown), and it already has about 27,000 orders for the truck.

What does that mean for auto investors? We need to know much more about its finances and business plan (that information will come later this year), but for now I think we can safely say that it's a company to watch.

John Rosevear owns shares of General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

DiamondPeak Holdings Corp. Stock Quote
DiamondPeak Holdings Corp.
General Motors Company Stock Quote
General Motors Company
$33.08 (-6.16%) $-2.17
Workhorse Group Inc. Stock Quote
Workhorse Group Inc.
$2.63 (-9.62%) $0.28
Nikola Corporation Stock Quote
Nikola Corporation
$3.58 (-9.26%) $0.36

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.