In the world of special purpose acquisition companies (SPACs), the timeline from start-up to a stock listing tends to be accelerated. A prime example would be electric-truck company Lordstown Motors (NASDAQ:RIDE). Lordstown’s shares are now publicly traded under RIDE stock.
Lordstown first announced that it would go public through a SPAC in August. This news electrified (pardon the pun) electric-vehicle stock traders, particularly the ones who wanted to take an early position in the next Tesla (NASDAQ:TSLA) or the next Nikola (NASDAQ:NKLA).
The plan was to implement a reverse merger with a shell company called DiamondPeak, which I previously reported on and which used to trade under the ticker symbol DPHC.
Today investors don’t have to position themselves with Lordstown indirectly through DPHC stock. Instead, they can just buy RIDE stock. That makes life a little bit less complicated, but are the shares worth owning? The stock is a speculative bet, but the potential for disruption and profitability is there.
A Closer Look at RIDE Stock
RIDE stock first opened for trading on Oct. 26 at around $20 per share. Unfortunately, the shares are now trading slightly below $18.
That’s not what most folks would call an auspicious start. The shares lost nearly 11.5% of their value just on Oct. 30. It might be too early to say that Lordstown has entered a bear market, but its trend is clearly downward.
At least we can say that the stock’s volume is fairly strong. During its first few sessions on the Nasdaq exchange, the daily trading volume for RIDE stock was consistently in the millions.
Not that the strong trading volume will provide much consolation for the owners of RIDE stock who’ve lost money. All of this begs the question of whether Lordstown Motors is worth investing in at all. Hopefully, we can find some reasons for concerned shareholders to hold the stock.
Almost Ready for Prime Time
Lordstown Motors first unveiled the prototype of its fully electric pickup truck, known as the Endurance, in June. That’s all fine and good, but investors undoubtedly want to know when the company’s Lordstown, Ohio-based production plant will finally start rolling out vehicles.
Moreover, investors will want to know whether the company has enough cash to meet its production milestones for the Endurance.
Thankfully, there are answers to these questions, courtesy of Lordstown Motors founder and CEO Steve Burns. He recently disclosed that Lordstown has “a near production-ready plant and approximately $675 million in proceeds from this transaction, which is more than enough funding to get us through initial production.”
Furthermore, the automaker claims to be on track to start commercial production in the second half of 2021. Bear in mind that things don’t always work out as planned in the world of start-ups. Still, at least Lordstown’s timeline has been established, so that’s good news.
A Potent Partner
Right on the company’s home page, Lordstown Motors proudly boasts that it’s developing “The World’s First All Electric Commercial Pickup.” That’s an ambitious objective for a fairly recent start-up.
This magnitude of disruption is possible, though, as Lordstown’s got a powerful backer in the form of automotive giant General Motors (NYSE:GM).
For one thing, Lordstown’s operations are housed in a former General Motors assembly plant. Also, General Motors committed to invest $75 million in the Lordstown SPAC merger. Other major investors included BlackRock (NYSE:BLK), Fidelity and Wellington.
At the very least, it can be said that Lordstown secured a terrific manufacturing plant from General Motors. Amazingly, this 6.2 million-square-foot facility is capable of producing 600,000 electric vehicles each year.
And as of Oct. 23, it appeared that General Motors was still strongly rooting for Lordstown’s success. “GM is excited about the progress Lordstown Motors is making because we believe they will help create more good-paying jobs in Ohio and especially in the Lordstown community,” General Motors commented.
The Bottom Line
Investors should be excited as Lordstown moves steadily closer to production. Plus, it certainly doesn’t hurt to have General Motors as a backer.
None of this guarantees that RIDE stock will recover. Still, the share-price dip could create a buying opportunity. Lordstown is in the early innings, and 2021 could be a grand-slam year for its shareholders.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
