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Why Shares of Electric Pickup Start-Up DiamondPeak Holdings Soared 63.9% in August

By John Bromels - Sep 9, 2020 at 9:41AM

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Another day, another EV company going public.

What happened

Shares of special purpose acquisition company (SPAC) DiamondPeak Holdings (DPHC) skyrocketed 63.9% in August, according to data provided by S&P Global Market Intelligence. That handily outperformed the broader market.

So what

You can't spell "fever" without "EV," and the stock market has been feverishly buying up shares of electric vehicle makers this summer. The sudden attention to the sector has prompted some EV companies to go public through a reverse merger with a SPAC, a move that avoids a traditional IPO. Electric truck start-up Nikola used a similar technique when it went public earlier this year.

A gauge showing the charge in an electric vehicle.

Image source: Getty Images.

That's what's happening to start-up electric pickup manufacturer Lordstown Motors, which announced on Aug. 3 that it would be going through the process with DiamondPeak. That caused DiamondPeak's shares to jump immediately. They only rose higher through the month as EV fever continued, buoyed by the impending stock split of Tesla and frequent news about other EV hopefuls like Nikola and NIO

Now what

Like Nikola, Lordstown Motors is taking pre-orders for an electric pickup truck, the Endurance. So far, it's collected about 27,000 orders. Unlike Nikola, Lordstown Motors has an existing manufacturing facility for its pickup: the former General Motors plant in Lordstown, Ohio, which made big headlines when it closed in 2019. The Endurance will feature an "in-wheel" drive system consisting of four electric motors, one located in each wheel. 

Also like Nikola, the company hasn't put a single vehicle into production. Technically, DiamondPeak doesn't even own Lordstown yet; the reverse merger won't happen until the fourth quarter of this year (unless something goes wrong). Production is expected to begin in late 2021 (unless something else goes wrong). 

While Lordstown seems to be on slightly firmer footing than Nikola, it's far from a sure thing. Neither one is Tesla, which has a comparatively long history of producing and selling operational vehicles, and is still a volatile and risky stock. Investors should be aware that, at least for now, DiamondPeak is a speculative investment fraught with risk. Most will want to keep it on the watch list as opposed to the buy list for the time being. 

John Bromels owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

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Stocks Mentioned

DiamondPeak Holdings Corp. Stock Quote
DiamondPeak Holdings Corp.
DPHC
Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$864.51 (-6.63%) $-61.39
General Motors Company Stock Quote
General Motors Company
GM
$36.06 (-0.47%) $0.17
Nio Inc. Stock Quote
Nio Inc.
NIO
$20.22 (-3.25%) $0.68
Nikola Corporation Stock Quote
Nikola Corporation
NKLA
$8.05 (1.26%) $0.10

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