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Tuesday, 04 August 2020 19:44

GM Invests in Lordstown Motors Merger That Will Make it Publicly Traded

Written by Jamie L. LaReau, Detroit Free Press
The electric Endurance pick-up truck at Lordstown Motors Corporation is shown June 25 in Lordstown, OH. The electric Endurance pick-up truck at Lordstown Motors Corporation is shown June 25 in Lordstown, OH. Tony Dejak, Associated Press

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Electric-truck maker Lordstown Motors is becoming a publicly traded company in a deal that will add $675 million to its coffers and boost its valuation to $1.6 billion, the company announced Aug. 3.

This transaction includes a $500 million fully committed private investment in public equity (PIPE), which includes $75 million of investments by General Motors, Lordstown Motors said.

 

The company, which bought GM's former massive Lordstown Assembly plant in Ohio last year, said it is merging with Delaware-based DiamondPeak Holdings Corp. DiamondPeak is a special purpose acquisition company and this merger will result in Lordstown Motors becoming a publicly listed company.
 
The combined company will be called Lordstown Motors Corp. and is expected to be listed  on the NASDAQ, trading under the new ticker symbol “RIDE.” The transaction is expected to close in September or October, a Lordstown Motors spokesman said.

 

'Lordstown stood out'

 

“We are thrilled with the opportunity to build Lordstown Motors into a top-tier electric truck company that is highly differentiated from the competition," Lordstown Motors CEO Steve Burns said in a prepared statement. "We are uniquely positioned to be a leader in the industry."

 

During a morning call with analysts that offered prepared remarks only, with no question and answer session, DiamondPeak CEO David Hamamoto said his team evaluated many investment options, but “Lordstown stood out as a differentiated high-growth company” that has a “transformation product and business plan.”

 

DiamondPeak was attracted to Lordstown Motors management team’s “vast” experience, its strategic relationships in the industry and the fact it is “one of the first electric vehicle manufacturers to acquire a plant that is production ready,” Hamamoto said. 

 

Also during the call, Burns added that owning GM's former plant gives Lordstown Motors an edge. 

 

“We have full ownership and control over the production of our vehicles," Burns told analysts. "Given its location in the Mahoning Valley, that location gives us access to a deep pool of talent including a trained manufacturing workforce.” 

 

GM's part in the deal

 

GM has its own electric vehicle strategy underway with the promise to deliver to market at least 20 new electric vehicles by 2023. As part of that strategy it plans to build batteries at a plant adjacent to Lordstown Motors assembly plant.

 

But GM also is investing $75 million in Lordstown Motors, a potential future rival in the electric pickup market through a PIPE investment. A PIPE is a mechanism that allows institutional investors to invest in private companies, which Lordstown is right now, said GM spokesman Jim Cain. GM's investment includes $25 million in cash plus noncash assets, including the plant and equipment.

 

"GM is excited about the progress LMC has made because we believe production of the Endurance pickup will help create jobs in the Lordstown community," said Cain.

 

A pro forma ownership will be divided among the investors in DiamondPeak, the PIPE and the existing shareholders, Cain said.

 

The pro forma implied equity value of the combined company is approximately $1.6 billion, assuming a $10 per share PIPE price and assuming there are minimal redemptions by DiamondPeak stockholders.

 

On July 29, GM broke ground on its new battery facility near Lordstown Motors facility. There, GM will make the Ultium batteries for its electric vehicles including its own Hummer electric pickup to be assembled at the Detroit Hamtrack Assembly plant starting later next year.

 

GM has partnered with LG Chem to make the batteries at the Ohio plant, which will eventually create over 1,000 jobs in that area. That plant is to be called Ultium Cells LLC.


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