Transportation

Lordstown Motors Shares Plummet As Two Top Execs Resign


Shares of Lordstown Motors plummeted more than 20% in early trading Monday as two top executives resigned, amid an internal investigation of fraud charges levied by an outside research firm.

CEO Steve Burns and chief financial officer Julio Rodriguez resigned Monday morning.

The electric truck startup, which owns General Motors

GM
former assembly plant in Lordstown, Ohio, said it is in transition “from the R&D and early production phase to the commercial production phase of its business.”

For now, Angela Strand, a member of the company’s board of directors and managing director of an advisory firm specializing in technology companies, will take the helm. Becky Roof will become interim CFO.

But the company’s survival is uncertain.

Shares of Lordstown tumbled more than 20% to as low as $8.95 in early trading Monday, but recovered slightly to trade at about $9.26 at 11 am.

Last month the company reported a loss of $125 million in the first quarter. Then, in a June 8 Securities and Exchange Commission filing, Lordstown stated there was “substantial doubt” about its ability to stay in business. The company has $587 million, but that isn’t sufficient to start commercial production of its Endurance electric pickup trucks.

According to Reuters, management regards its cash reserves as strong enough to pay suppliers and start limited production, while it seeks additional financing.

The filing stated that the first trucks won’t be delivered to customers until the first quarter of 2022. If that goal is met, Lordstown would be slightly ahead of Ford’s scheduled launch of its electric F-150 Lightning pickup truck.

“We are debt free, have significant tangible assets and multiple viable avenues to raise capital, including asset-backed financing, equity or debt financing, as well as potential strategic investments over the longer term,” the company said. “We are already in active conversations with multiple parties to do so.”

Lordstown Motors has retained a unit of AlixPartners, a restructuring consultancy, to help.

In March Hindenburg Research, which took a short position in Lordstown stock, charged that Burns has been fired by his former company, Workhorse Group

WKHS
, and that Lordstown has misled customers and investors.

Lordstown’s plight illustrates the perils electric vehicle makers, and especially startups, face as consumers adapt slowly to battery-powered vehicles. This is a technology that requires more and faster charging infrastructure, even as gasoline prices remain relatively low.

Nikola is another electric vehicle startup that went public through a SPAC deal, only to be targeted by Hindenburg, that same short seller betting against Lordstown. Similarly, Nikola’s founder and CEO also resigned in the wake of Hindenburg’s allegations.  

It is one of multiple EV-related ventures that have gone public in the last year, through mergers with special purpose acquisition companies, or SPACs. In this case, a SPAC called DiamondPeak Holdings combined last October with Lordstown to raise $675 million.

These are shell, or blank-check, companies with no commercial operations. They are formed to invest in selected startups for the purpose of taking the public.

The problem is many of these businesses have negligible sales, unproven paths to profitability and less than robust product lines.

In a statement, Lordstown board member David Hamamoto, said, “Lordstown Motors has achieved significant milestones on the path to developing the first and best full-size all-electric pickup truck. We thank Steve Burns for his passion and commitment to the company.”

General Motors decided in 2018 to close the 6.2-million square foot plant because of falling sales of its Chevrolet Cruize compact sedan. GM retained a stake along with LG Chem in a battery plant near what is now Lordstown Motors’s factory. Battery production is expected to start next year.

GM owns 7.5 million shares of Lordstown Motors, or a stake of less than 5%.



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