PreMarket Prep Stock Of The Day: Lordstown Motors

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

The bumpy road Lordstown Motors RIDE has been traveling on just hit another pothole.

The Company: Lordstown Motors is an automotive company founded for the purpose of developing and manufacturing light-duty electric trucks targeted for sale to fleet customers. The company has been developing its flagship vehicle, the Endurance, an electric full-size pickup truck

Sound Familiar? The price action in a majority of SPACs that evolve into real companies follows a similar pattern. After debuting at the $10 level, there is rampant speculation on which company will be acquired by the blank check company During the time period before the final decision is announced the issue will have explosive rallies.

On many occasions, once the announcement is made (no matter who it is), profit-takers will engulf the issue trapping late buyers in their wake.

A Bit Of A Different Course: Lordstown Motors did not exactly follow the aforementioned scenario, but the end result is the same. Whereas many SPACs do not give investors second, third or even fourth chances to exit the issue after the conversion, Lordstown Motors did.

Its ultimate high was made a few weeks before the merger announcement (Oct. 6, 2020), when it peaked on Sept. 22 at $31.80. On the day of the announcement, shares declined from $23.28 to $21.58. On the first day of trading as RIDE (Oct. 26), the issue had a modest rally from $18.21 to $18.97.

It should be noted the SPAC-mania that lasted into February afforded investors the opportunity to exit the issue above $30 on several occasions. In January it peaked at $30.74 and bested that level in February when it peaked at $31.74.

Targeted By Short Seller: While the issue was hovering in the same area ($18) as it was on its first day of trading as RIDE, the company was targeted by the short-selling firm, Hindenburg Research, on March 12.

On that day the issue swooned from $17.71 to $14.78 and only rebounded to $16.38 a few days later before it continued its descent into single digits.

The Wheels Come Off The Wagon: On Sunday, the company announced that its flagship product, the electric pickup truck Endurance, which was competing in the off-road desert race, completed only about 40 of the required distance of 250 miles.

Price Action: After ending the week at $10.02, sellers seized on the issue at the commencement of premarket trading. Its opening tick at 4 a.m. was $9.81 and began to move lower.

During the regular trading hours, it traded down to $8.89 (new all-time low) and peaked at $9.34. As of 2:15 p.m., it's attempting to remain in the $9 handle.