Lordstown says it has received more than 27,000 preorders for its Endurance electric pickup.
Photo: Matthew Hatcher/Bloomberg NewsLordstown Motors Corp., the electric-truck startup working to revive a former General Motors Co. plant in Ohio, plans to go public through a reverse merger deal, becoming the latest firm to tap investor excitement around battery-powered vehicles.
Ohio-based Lordstown Motors, looking to tap investor excitement around battery-powered vehicles, said Monday it will merge with publicly traded DiamondPeak Holdings Corp. DPHC 21.00% in a deal that aims to list it on the Nasdaq under the ticker symbol “RIDE.” The deal implies a value of $1.6 billion for the electric-truck maker, the companies said.
Investor enthusiasm for electric-vehicle technology has heightened in recent months, lifting valuations for little-known startups trying to put their first plug-in models on the market.
Part of the interest is being driven by Tesla Inc., whose shares have more than tripled this year, making the company the world’s most valuable auto maker, analysts say.
Lordstown is now the third electric-vehicle startup this year to reveal plans for going public by reverse merging with a blank-check company, rather than pursue a traditional IPO process itself.
Blank-check companies like DiamondPeak are established for the sole purpose of making an acquisition, using funds raised through an initial public offering.
They have no operating history when they go public, and within a specified time, typically two years, they must use the proceeds of the IPO to acquire or merge with a target company. The mergers have become more popular as the IPO market has been rife with volatility amid the Covid-19 pandemic.
For instance, electric-truck startup Nikola Corp. went public in June after concluding a reverse merger with blank-check company VectoIQ Acquisition Corp. Nikola briefly surpassed Ford Motor Co. in market cap in its first week of trading, but has since retreated.
Fisker Inc., a new electric-car venture headed by well-known car designer Henrik Fisker, also said it would merge with a special-purpose acquisition company backed by private-equity giant Apollo Global Management Inc. The deal gave Fisker an implied valuation of $2.9 billion.
Wall Street’s appetite isn’t limited to just U.S. companies. Depository shares in Chinese auto maker Li Auto Inc., an electric-vehicle maker targeting the Chinese SUV market, surged more than 50% in the company’s first day of trading in the U.S. on Thursday.
The fervor for electric-vehicle startups stands in contrast to the more tepid response to plans laid out in recent years by traditional auto makers, which are also investing billions in battery-powered models and have a number of new plug-in vehicles planned for global markets.
Despite such efforts, GM, Volkswagen AG and other car companies have struggled to translate those plans into stock-price gains.
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GM’s stock price has taken a hit since the coronavirus pandemic worsened in the U.S. in March and is down 32% from the start of the year through Friday’s close. The decline has come even as GM beat analysts’ expectations on earnings in the second-quarter. “There does seem to be a disconnect between the EV gold rush and the way that traditional [auto makers] are being valued at the moment,” said Tim Urquhart, principal automotive analyst at IHS Markit LLC. “The truth is probably somewhere in the middle.”
Mary Barra, chief executive at GM, which has said it would invest roughly $20 billion in electric and autonomous technology for its vehicles, was pressed last week on an analyst call whether the company would consider spinning off its electric-vehicle initiatives to better capitalize on investor sentiment.
“We are open to looking at and evaluating anything that we think is going to drive long-term shareholder value,” Ms. Barra said. “Nothing is off the table.”
Lordstown’s deal with DiamondPeak includes $500 million in private investment, including $75 million from GM.
The deal has also drawn funding from institutional investors, including Fidelity Management & Research Co., Wellington Management Co., Federated Hermes Kaufmann Small Cap Fund and funds and accounts managed by BlackRock Inc., among others, the companies said.
The business combination values Lordstown at an implied $1.6 billion pro forma equity value, at the $10 a share private investment in public equity price.
The $75 million investment from GM includes certain in-kind contributions that have already been provided to Lordstown.
The transaction is expected to close in this year’s fourth quarter. DiamondPeak shares rose 21% Monday.
Lordstown is working to put its first electric truck, the Endurance, on the market next summer. Last year, it purchased a closed GM assembly plant in Lordstown, Ohio, aiming to retool the 6.2 million-square-foot factory capable of building more than 600,000 electric vehicles annually.
President Trump had criticized GM and Ms. Barra for closing the plant and applauded the deal to sell it.
Vice President Mike Pence visited the Lordstown factory in June for the unveiling of a prototype Endurance pickup truck.
The truck model looks to offer competition in a market that is a profit engine for GM, Ford and Fiat Chrysler Automobiles NV.
The Endurance is designed as a commercial work vehicle, a market where electric vehicles are expected to have an advantage because they can offer lower maintenance cost compared with gas-engine vehicles, Lordstown Motors Chief Executive Steve Burns recently told The Wall Street Journal.
Lordstown Motors said Monday that it has received more than 27,000 preorders for the vehicle, representing over $1.4 billion of potential revenue.
—Michael Dabaie contributed to this article.
Write to Ben Foldy at Ben.Foldy@wsj.com
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