By: Doug Fogel — October 16, 2020
Can Workhorse (WKHS) Keep on Truckin'?
Do you have any information on the coming merger of DPHC/WKHS? Who is Lordstown Motors to WKHS, (and) what is going to happen to WKHS' stock price?
First off, DPHC is the ticker symbol for DiamondPeak Holdings Corp.
It’s what’s known as a special-purpose acquisition company (SPAC).
I’ll talk about that company and SPACs in a moment.
But first, I want to provide a little background on WKHS (the ticker symbol for the Workhorse Group).
I recommended this stock back on May 27, when it was selling for $2.63.
On Sept. 21, it hit an intra-day high of $30.99.
It closed at $22.30 yesterday.
The stock started drawing serious investor interest on May 8, 2019.
That’s when General Motors (GM) CEO Mary Barra told President Trump that her company would sell its auto manufacturing plant in Lordstown, Ohio, to Workhorse.
Trump then tweeted this news to the world.
In the wake of that tweet, Workhorse's stock shot up 200% – going from $0.82 to $2.65.
Public interest in the company exploded as a result (it was so intense it actually crashed the Workhorse website).
Six months later, GM did indeed sell the plant… but not to Workhorse.
The sale was to a private company formed by former Workhorse CEO Steve Burns.
That company is the Lordstown Motors Corp. (LMC), which Burns formed in connection to the sale.
Workhorse then signed a three-year licensing agreement with the company.
That agreement gives Lordstown Motors a license to Workhorse intellectual property related to the Workhorse W-15 electric pickup truck.
In exchange for that license, Workhorse got a 10% ownership stake in Lordstown Motors, as well as royalties on the sale of these trucks.
Now here’s where DiamondPeak Holdings comes in.
That company is merging with Lordstown Motors – not Workhorse.
And that deal is worth an estimated $1.6 billion, as that’s the estimated value of Lordstown Motors.
As a result of that deal, that makes Workhorse’s stake in the merger worth about $160 million.
So why is DiamondPeak Holdings buying Lordstown Motors?
Because it’s in the business of buying private companies and taking them public.
As I said earlier, it’s a SPAC, which is a shell company whose only purpose is to buy private companies and take them public.
When DiamondPeak takes Lordstown Motors public, a move that should happen sometime in Q4 2020, it will have the ticker symbol of RIDE.
Workhorse’s agreement with Lordstown Motors is obviously good news for shareholders.
But what it's really got its eyes on is the U.S. Postal Service contract the company is bidding for.
As I’ve mentioned in previous articles, Workhorse is bidding for a contract to replace 180,000 Post Office vehicles.
They would be purchased over a five- to seven-year period at a cost of $6.3 billion.
A decision is due by the end of this year.
If it pans out, the Workhorse stock price should spike.
If not, then the stock is still on solid footing, as it’s a frontrunner in the new electric pickup truck market.
To that end, the company is a prime buyout candidate from a major auto manufacturer.
That’s it for today.
Have a great weekend.
Editor, True Market Insiders