Even as It Struggles, DiamondPeak Stock Isn’t Just All Story

My InvestorPlace colleague Lou Carlozo recently opened a DiamondPeak Holdings (NASDAQ:DPHC) story with a Charles Dickens reference. I always appreciate a good literary reference. With that in mind, I think the story about whether to buy DiamondPeak stock comes down to a tale of two cities. Or maybe it’s the same city. I’ll let you decide.

Image of a map showing Lordstown's location.
Source: SevenMaps/ShitterStock.com

By now you know the story of DiamondPeak. It is the special purpose acquisition company (SPAC) funding the reverse merger with Lordstown Motors.

This is one of many electric vehicle (EV) companies to begin publicly trading in 2020. When the merger is complete, the company will retain the Lordstown name and trade under the ticker symbol RIDE.

A Closer Look at DiamondPeak Stock

The Lordstown plant is located in Ohio’s Mahoning Valley. It’s a part of the state that has seen better days. At one time the plant, which takes its name from the village where it is based, employed over 10,000. After General Motors (NYSE:GM) closed the plant, the future looked bleak.

This is where Lordstown comes in. Chief executive officer Steve Burns saw the potential to buy a plant that will require (by Lordstown’s estimations) minimal retooling to make it a shining star in the electric vehicle universe.

Burns has begun hiring and hopes to employ up to 5,000 employees sometime next year as the company begins to manufacture the Endurance.

And as it turns out, Lordstown is not alone. In December 2019, GM formed a joint venture with LG Chem to make battery cells. GM spokesperson Dan Flores says the plant should create more than 1,100 jobs when it is finished in the first quarter of 2022.

Electric Vehicles Are a Winning Issue

The first presidential debate was either a comedy or a tragedy (and maybe a bit of both). However, one thing the two candidates were seemingly in agreement on was support of electric vehicles. I admit that this was a concern I had in a previous article about DiamondPeak stock.

President Trump has spoken in the past about doing away with the federal government’s $7,500 subsidy for electric vehicles.

However he has seemed to retreat from that viewpoint. When GM pulled out of Lordstown, President Trump expressed his displeasure with the move one of his “Tweet storms” about the plant closing. And he also used the social media app to praise the purchase of the Lordstown plants, even though at the time misidentifying the buyer as Workhorse

Trump’s “conversion” was all but complete with Lordstown Motors CEO Steve Burns visit to the White House in late September. At that time, Trump seemed very impressed with the company’s Endurance offering.

Of course, there’s likely a political calculation taking place as well. And with jobs on the line, it would be folly to oppose an industry that is creating jobs in a crucial swing state.

DiamondPeak Stock Is All Fueled Up

I was skeptical of DiamondPeak stock a month ago. I expressed perhaps unwarranted concern about the effects of an uncertain election outcome. But it’s safe to say that Lordstown Motors will be a winner no matter how the election turns out. So maybe it really just doesn’t matter.

But if there’s less uncertainty regarding demand for electric vehicles why does DiamondPeak stock keep dropping? Since I last wrote about the stock, it’s down about 30%. Some of this seems to be because of the controversy surrounding Nikola (NASDAQ:NKLA). And some of it seems to be more fundamental concern about the company’s fundamentals.

However, for a company like Lordstown, the proof will be in the production. At this time, the company has approximately 27,000 pre-orders for its Endurance electric truck. Right now, the stock is priced as if the vast majority of those pre-orders will turn into actual sales.

Of course, that’s anybody’s guess. Because while a city like Lordstown may be getting a shot in the arm, there are many cities throughout America that are enduring some rough times. And that means there is no certainty that purchase intent of commercial vehicles will turn into actual purchases.

I think a speculative position in DiamondPeak stock is warranted. But don’t make a large commitment until it’s clear the company has real demand.

On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.


Article printed from InvestorPlace Media, https://investorplace.com/2020/10/diamondpeak-stock-isnt-just-all-story/.

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