DiamondPeak (NASDAQ:DPHC) is a SPAC that’s due to merge with electric-vehicle maker Lordstown Motors by the end of the year, but that doesn’t mean DiamondPeak stock is destined for greatness.
After the merger, Lordstown will take over the shares which will then trade under the symbol “RIDE.”
While Lordstown is building an intriguing vehicle and has received a meaningful number of deposits for its upcoming vehicle, investing in DiamondPeak stock at this point looks quite risky.
Lordstown is developing an electric-pickup truck that it calls the Endurance. The company wants to initially sell the Endurance to commercial entities.
Lordstown reported that it has “received 27,000 orders which represents $1.4 billion in potential revenue mostly from commercial fleet customers,” according to The Detroit Free Press.
A Closer Look at DiamondPeak Stock
According to a Seeking Alpha column by Concourse Partners, which invested in DiamondPeak stock, Lordstown has placed motors within the wheels of the Endurance.
In this way, the company “plans to recapture the energy that is typically wasted getting from the engine to the wheels” and reduce “the ongoing maintenance and associated costs required to keep the vehicle in peak shape,” Concourse reported.
Further, the company’s CEO, Steve Burns said that the vehicle can escape a mud trap more easily than “traditional” pickup trucks.
If Lordstown’s technology can lower the costs of maintaining pickups while enabling the Endurance to run on less electricity than competing vehicles and allowing it to navigate difficult terrain more effectively, then it could indeed be worth investing in.
Facing Big Risks
According to the website The Next Web, “most” believe that Lordstown’s decision to place motors in the Endurance’s wheels isn’t a great idea.
Specifically, the website contends that the approach “can negatively affect handling, but not dramatically,” while causing vehicles’ parts to wear out more quickly.
The Next Web did, however, say that the motors will be ” easy to replace if they do get damaged or fail.”
Meanwhile, one of Lordstown’s competitors, electronic-truck maker Rivian, is working on an electric pickup truck that sounds like a truly revolutionary vehicle.
Specifically, Rivian’s truck “will get more than 400 miles of driving range and acceleration times comparable with those of a supercar, reports say,” according to The Detroit Free Press.
Rivian has sold 100,000 electric delivery vans to Amazon (NASDAQ:AMZN) and received hundreds of millions of dollars in investments from Ford (NYSE:F) and Amazon.
As a result, it’s safe to assume that it does have excellent technology and a large amount of credibility. And if Rivian can produce a pickup truck that has a range of 400 miles (versus Lordstown’s rfeported range of 250 miles) and the “acceleration times..of a supercar,” Lordstown could very well have trouble selling many of its own pickup trucks.
Also noteworthy is that Burns, Lordstown’s CEO, was previously the CEO of Workhorse (NASDAQ:WKHS), while Lordstown utilizes technology that was previously developed by Workhorse.
In previous columns, I’ve pointed out that Workhorse has multiple “red flags,” including its failure to make “any impressive deals recently,” reported technical problems with its drones, and the failure of UPS (NYSE:UPS) to take possession of all of the vehicles that it ordered from Workhorse two years ago.
Given the close connections between Workhorse and Lordstown, I’m reluctant to recommend buying DiamodPeak stock at this point.
The Bottom Line on DiamondPeak Stock
The Endurance has some interesting characteristics that could theoretically make it a big hit.
But given likely tough competition from the highly credible Rivian, possible negative aspects of the Endurance, and the issues that Lordstown’s sister company, Workhorse, has faced, I recommend that investors avoid buying DiamondPeak stock now.
Further, I believe that investors who already own the shares should sell them.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.