Lordstown Motors IPO Gets Modest Reception as Stocks Fall
YOUNGSTOWN, Ohio – Lordstown Motors Corp.’s first day of publicly traded shares elicited a cool reception on Wall Street as investors grappled with concerns over a surging coronavirus pandemic that’s led to new restrictions worldwide.
Shares of Lordstown Motors, which began trading on Nasdaq under the ticker symbol “RIDE” Monday, opened at $19.32 per share and closed at $18.97, down 1.8% by the end of regular business hours. The stock peaked at $21.75 Monday.
Volume stood at 4,942,430 shares traded for the day.
Overall, stocks were pummeled Monday as the Dow Jones Industrial Average lost 650.19 points, or 2.29%, and the Nasdaq was down 189.34, or 1.64%.
“It’s likely that you’re going to see some more volatility to the good and the bad as the market tries to determine what the right valuation for that company is,” said Jonathan Lapine, principal at W3 Wealth Management in Warren.
Lapine said initial public offerings, or IPOs, should be evaluated on a case-by-case basis with an understanding on where each company stands in their maturity cycle.
Lordstown Motors is a startup manufacturer in the electrical vehicle market and in the early stages of growth. “The earlier on in one’s infancy on that cycle, the more risk and more volatility,” he said.
Lordstown Motors purchased the former General Motors Lordstown complex in November 2019, where it plans to manufacture the Endurance, billed as the first all-electric pickup truck.
The company has produced a prototype, but still needs to ramp up production and move through testing on the new vehicle. Full production of the Endurance is expected in September.
Lapine said that the company’s 40,000 preorders is a strong number, but the real value of Lordstown Motors won’t be ascertained until it starts to manufacture the product. There’s also a crowded field of competitors that are angling for the same business in the future.
“You’ve got a number of different companies in similar points in their life cycle trying to race to market and compete, potentially, over the same turf,” he said.
Lordstown Motors this summer entered into a merger with DiamondPeak Holdings Corp., a special purpose acquisitions company, or SPAC, that helped leverage $675 million to enable production of the Endurance. The merger was officially agreed to last week and the stock was listed under the new name Monday. DiamondPeak stock closed at $18.21 on Friday, after it was announced Lordstown Motors would begin trading the following Monday.
GM has invested $75 million into the venture, $50 million of which came from a line of credit it extended to Lordstown Motors so it could purchase and begin retooling the assembly plant.
Lordstown Motors President and CEO Steve Burns said the company wants to initially target the commercial fleet market and then eventually move into the all-electric consumer market.
With 40,000 pre-orders of the Endurance, Burns said he was surprised that the truck has attracted so much attention this soon.
“We didn’t expect that much that quickly,” Burns said. “It’s just a pent-up demand. Fleets are bypassed by the electrification effort. There are a lot of passenger cars coming but nothing for fleets.”
Lordstown Motors was able to secure much of this demand since the Endurance is expected to be the first all-electric pickup in the market. “I don’t think we’ve even scratched the surface,” he said.
Burns said 37 beta test models are slated for production starting in January and the company will launch into full production next September. It is building several “alpha” versions to test durability while he noted the prototype continues to perform well.
As for employment, “We stated that by production we’d probably be at 600,” he said. “But, now we feel that that’s going to be about 800.”
Ivan Drury, an analyst at Edmunds, said the company’s strategy of targeting fleet customers helps set Lordstown Motors apart from others who are moving into the all-electric passenger car segment or consumer truck space. The downside is that the Endurance is likely to be stress-tested much more than any other vehicle.
“They’re going to be loaded up, they’re going to be driven hard in the sense of driving around the extra weight all the time,” he said. “That’s going to be taxing, and without having a dealer network, they’re going to have to have a very good supply chain.”
The company has so far hired 236 employees – all of them in engineering and design – plus 150 contractors.
Lordstown Motors has not as yet released volume targets, but said it intends to make use of all of the sprawling former GM complex. “We didn’t buy a 6 million square-foot plant not to fill it up,” he said.
Copyright 2020 The Business Journal, Youngstown, Ohio.