General Motors Releases Lordstown Motors Mortgage
LORDSTOWN, Ohio – On the same day Lordstown Motors Corp. announced it would begin public trading on Nasdaq, the electric vehicle startup had something else to celebrate: General Motors officially released the company from most of its mortgage obligations agreed to late last year.
According to documents filed in the Trumbull County Recorder’s office, GM agreed to release the mortgage effective Oct. 23, the same day DiamondPeak Holdings Corp. announced that Lordstown Motors would launch its initial public offering the following Monday, Oct. 26, under the ticker symbol “RIDE.”
Documents show that the released portion of the mortgage includes the former GM Assembly plant and the Lordstown West plant, commonly known as the fabrication plant.
It appears that the original mortgage instrument is still in effect on property near where GM and LG Chem are building a $2.3 billion battery manufacturing plant just northeast of the Lordstown Motors complex, known as Ultium Cells LLC.
Last November, GM and Lordstown Motors entered into a mortgage agreement that leveraged a $50 million line of credit to Lordstown Motors so it could purchase and begin retooling the former GM plant. The plant, which once produced the Chevrolet Cruze, was shut down in March 2019 and GM opted to sell the facility to Lordstown Motors.
Under the agreement, GM had the option to repurchase the plant, but allowed that option to lapse.
Instead, the Detroit automaker agreed to tendering $50 million worth of “plant assets,” “plant permits,” and operating costs that its covered since the purchase, plus another $25 million in cash in return for a stake in Lordstown Motors.
In August, DiamondPeak Holdings Corp., a special purpose acquisition company, or SPAC, announced it had entered into a merger agreement with Lordstown Motors. DiamondPeak said it had raised $675 million to initially fund the operation, boosting the value of Lordstown Motors to approximately $1.6 billion in pro forma equity.
GM, along with institutional investors such as BlackRock, Fidelity Management, Wellington Management and Federated, were among the initial private investors that together committed $500 million to the venture.
Lordstown Motors has produced a prototype all-electric pickup, The Endurance, which is expected to begin full production in September. Initially, the vehicle will be targeted to fleet users.
The company’s debut this week on Wall Street comes at a time when investors are wrestling with the impact of the surging Covid-19 pandemic, which has led to additional restrictions worldwide and particularly in Europe.
Stocks nosedived Friday to cap off the worst trading month since March, and Lordstown Motors’ first week on the Nasdaq showed every sign of the market’s strain.
Lordstown Motors closed Friday at $13.05 per share, down 11.4% from its previous close of $14.74 on Thursday.
On Monday, Lordstown Motors opened at $19.25 per share and dropped precipitously throughout the week. By the close of business on Friday, its value had decreased by more than 32%, as investors navigated through the effects of the pandemic surge, the coming presidential election, mixed earnings from the tech sector, and the absence of a federal stimulus plan to help the economy.
Other electric vehicle manufacturers also experienced sharp declines throughout the week.
Workhorse Group, the Cincinnati-based EV company that owns a 10% stake in Lordstown Motors, saw its stock drop 23% over the week, while Nikola witnessed it shares plunge 17%. Even Tesla, long the benchmark of the electric vehicle space, posted a loss of 5.5%.
“Lordstown is going through the process,” said Brian Laraway, a partner at Bury Financial, Poland. He said the future trend toward electric vehicles should place Lordstown Motors in a secure footing for the long-term.
“The overall EV trend looks very strong,” noting that by 2024, data show that electric vehicles are likely to comprise 10% of the auto industry.
What the company lacks right now is solid sales and financial performance, since Lordstown Motors has yet to produce a vehicle for the commercial market.
“Once we get to the other side, the whole EV category will look better based on earnings,” Laraway said.
Copyright 2020 The Business Journal, Youngstown, Ohio.