EV Maker Lordstown Dips on SEC Look at Short-Seller Claims
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Electric-truck startup Lordstown Motors Corp. fell in extended trading after reporting it received an inquiry on its operations from the Securities and Exchange Commission.
Shares of Lordstown fell as much as 7.2% to $14 before recovering somewhat after the company reported fourth-quarter results. The stock was down 25% this year through the close March 17 in New York.
In its first quarterly call as a public company, Lordstown defended an assertion from Hindenburg Research, saying that it has seen strong demand for its Endurance pickup truck despite the short seller’s charge that the company’s preorder claims are overblown.
CEO Steve Burns said Lordstown won’t directly address Hindenburg’s accusations and that the company is cooperating with regulators. The truck is on schedule to be built in September, which Hindenburg’s report had doubted, and interest from customers indicates strong demand, he said. Lordstown and founder Burns were accused of misleading investors by exaggerating orders for the Endurance.
“Our interaction with our customer has allowed us to gauge demand,” Burns said on the call. “This gauge is important because tooling can cost hundreds of millions of dollars. We are in the process of expanding our production capacity to 60,000 trucks a year.”
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Lordstown acquired a defunct General Motors Co. plant in Ohio last year. The company went public in November via a merger with the special purpose acquisition company DiamondPeak Holdings.
Endurance Demand
In a statement, Burns said demand for the Endurance pickup truck has exceeded expectations. Given the greater interest, Lordstown is accelerating development of an electric van for commercial customers, with a target of starting production in the second half of 2022.
The company had $630 million in cash at the end of the year. With projected capital expenditures of $250 million to $275 million in 2021, and $220 million to $235 million in operating costs and R&D, Lordstown expects to finish this year with at least $200 million in cash. The company is applying for a loan from the U.S. Department of Energy under the Advanced Technology Vehicles Manufacturing program.
Lordstown had said earlier this week that it would address the allegations “in due time.”
Burns didn’t address accusations that he was pushed out as CEO of Workhorse Group Inc. Workhorse, which owns a stake in Lordstown, is developing an electric delivery van.
In its report, Hindenburg said Lordstown is a company “with no revenue and no sellable product, which we believe has misled investors on both its demand and production capabilities.” The firm holds a short position in Lordstown and stands to gain from a drop in the shares.
The company has been upfront about not having revenue from vehicle sales and is spending cash getting its truck into production.
Hindenburg previously targeted another EV startup, Nikola Corp., last September, claiming the company misled investors. That report similarly sparked a sell-off in shares of Nikola, triggered an SEC probe and ultimately prompted a disclosure from the company confirming some of the allegations.
Hindenburg said that Lordstown’s 100,000 preorders are “largely fictitious.” The report zeroed in on a specific order for $735 million worth of electric vans from E Squared Energy Advisors, a Texas company that doesn’t yet operate a fleet.
In an interview last week, Burns said, “We have always been really clear, verbally and every time that we talk about preorders, that these are nonbinding.”
E Squared CEO Tim Grosse said in an email that his company is a startup that plans to buy electric vehicles and the infrastructure to manage them, and rent them to others. Since Lordstown hasn’t started production, and no one else is selling an electric pickup yet, the group hasn’t acquired a fleet. The company will have the cash, he said.
Grosse said that while his company’s letter of intent to buy $735 million of Lordstown vehicles over the next three years may seem large, “It’s a fairly small amount from the investment pool from which we draw that has much more capital than that available.”
Lordstown is just one zero-emission-vehicle manufacturer “that we can purchase vehicles from,” Grosse said.
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