Why Lordstown Looks to Be An Early SPAC Winner

One of the newest names on the Nasdaq composite is Lordstown Motors (NASDAQ:RIDE). The electric truck manufacturer went public as RIDE stock in late October after a blank-check merger with DiamondPeak Holdings.

an electric vehicle charging. image represents ev stocks like fsr stock

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Perhaps not surprisingly, RIDE stock shot up nearly 20% on its first day as a publicly traded company. Investors had high hopes that its relationship with General Motors (NYSE:GM) and growing interest in EV companies would turn a pretty penny.

So far, their hopes are being rewarded. Lordstown stock is up nearly 40% since the company began trading on Oct. 26. And while a month scarcely begins to scratch the surface when looking for the best growth stocks, there are reasons to believe that Lordstown maintains great potential for growth-minded investors.

The DiamondPeak Merger

Lordstown agreed on Aug. 3 to merge with DiamondPeak, which was a special purpose acquisition company (SPAC). The deal was finalized on Oct. 22 in a $1.6 billion transaction, making it one of the quickest SPAC deals of the year.

SPAC deals are an increasingly popular way to take a company public these days. From Day One, the DiamondPeak-Lordstown deal got a lot of attention.

As part of the merger, Lordstown was to receive $675 million in gross proceeds, which it would use to fund production of its Endurance electric pickup. The Endurance, which is expected to go into production next year, could very well win the race to be the first electric pickup truck on the market.

Four electric in-hub motors are expected to produce 600 horsepower for the Endurance, with towing capacity at 7,500 pounds and a range of 250 miles.

The Endurance, which is being geared to commercial fleets instead of individual owners, will be made a former GM plant in Ohio. GM also has a stake in Lordstown, committing $700 million in 2019 to back Lordstown Motors, as well as in-kind contributions.

Preorder News for RIDE Stock

On Nov. 16, Lordstown announced that it received about 50,000 nonbinding production reservations for the Endurance pickup. It said the average order size was 500 vehicles.

The company had previously announced 40,000 preorders in late September, so an increase of 25% in less than two months shows significant growth.

“We continue to make significant progress across all fronts, and we are excited to reveal these developments with the investment community and future customers today,” Lordstown CEO Steve Burns said.

The company announced it would double its staffing at the Lordstown plant to 500 by the end of the year and would employ 1,500 by the end of 2021. Deliveries of the Endurance pickup are expected to begin in September.

The announcement sent RIDE stock up 26% in a single day.

Why Lordstown Looks Like a Winner

That gives Lordstown a market capitalization of more than $4 billion – a huge amount for a company that won’t be in a position to deliver its first product for 10 months.

If the company manages to sell all of its nonbinding 50,000 preorders, it should see revenue north of $2 billion. There’s money to be made here if Lordstown can come through with the promises its making.

Lordstown’s partnership with GM gives it a unique advantage. By working out of a former GM plant with 6.2 million square feet, Lordstown has the production space to produce as many as 600,000 vehicles a day.

And its notable that the White House is changing hands from Republican to Democrat. The new Biden administration will be more willing to promote alternative fuel programs than President Donald Trump was.

Programs that encourage municipal, state and federal automotive fleets to switch from gasoline to electric will only benefit RIDE stock. Remember, Lordstown is gearing production of the Endurance to fleets, rather than individual sales.

The Bottom Line

A month isn’t enough time to write the history of a stock, but RIDE stock is off to a good start since the SPAC merger between Lordstown and DiamondPeak Holdings.

The company has the financial backing it needs to ramp up production and win orders for pickup truck fleets, even if it doesn’t see significant revenue until the second half of next year.

RIDE stock has an “A” grade and is strong buy recommendation in my Portfolio Grader right now.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation

Article printed from InvestorPlace Media, https://investorplace.com/2020/12/why-lordstown-ride-stock-looks-to-be-an-early-spac-winner/.

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