Updated: Lordstown Motors to Sell Assets to Former CEO for $10 Million
LORDSTOWN, Ohio – In a surprising turn of events, an agreement was reached late Friday to sell the assets of Lordstown Motors Corp., for $10 million, to LAS Capital and Stephen S. Burns, the founder and former CEO of the EV startup and the majority equity holder of LAS Capital.
The agreement was posted on the bankruptcy court docket at the close of business Friday.
An auction was scheduled to begin at 1 p.m. Friday but was canceled by Lordstown Motors.
In a filing with the U.S. Securities and Exchange Commission, the company reported that it “received several non-binding proposals for the purchase of specified assets … [but] the selling entities through their board determined that none of these other proposals was a qualified bid in accordance with the bid procedures and determined LAS Capital to be the successful bidder.”
The $10 million deal includes “specified assets … related to the design, production and sale of electric light duty vehicles focused on the commercial fleet market free and clear of liens, claims, encumbrances and other interests,” according to the SEC filing, plus the assumption of “certain specified liabilities.” It does not include the company’s approximate $100 million in cash.
Julio Rodriquez, former chief financial officer of Lordstown Motors, “is one of the indirect managers of LAS Capital,” Lordstown Motors told the SEC, and is the former chief financial officer of LMC.
Burns and Rodriquez both resigned from Lordstown Motors on June 14, 2021. Neither has had any management role since “and do not currently have any affiliation with the company other than as a third-party bidder” in the bankruptcy court sale process, according to Lordstown Motors.
Burns has personally guaranteed the $10 million purchase price obligation of LAS Capital, which has deposited $1 million into an escrow account. Among the assets LAS is buying are any finished or unfinished Endurance pickup trucks that remain at the manufacturing space it leases from Foxconn, which acquired the former General Motors plant from Lordstown Motors in May 2022 as part of a manufacturing collaboration with Foxconn that essentially ended earlier this year.
According to the LAS Capital website, the LAS name stands for “Land Air and Sea — the three spaces we work within to create superior electric vehicles, and the three of earth’s elements made better by our efforts.”
The site describes Burns as a successful “serial entrepreneur [who has] been a first-mover inthe EV space for the past 15 years. Without naming Lordstown Motors, the website touts that Burns has taken two EV companies public — “one of which reached +$1 billion market cap during his tenure.” Also unmentioned is the fact that Burns founded Burns also founded Workhorse Group, an early investor in Lordstown Motors.
LAS says it has four electric vehicle companies, all of which “have working prototypes and are in various stages of pre-production.” They include Greenstreet, which is developing a three-wheel “fun and sun” EV; RYSE Aero Tech, developer of a vertical take-off and landing aircraft; Blue Innovations Group, whose stated goal is to “revolutionize the entire boating industry”; and Power Shower, the developer of “the world’s first plug-and-play automatic shower head that cuts water waste in half.”
The LAS Capital purchase agreement with Lordstown Motors contains customary representations, warranties and covenants for a bankruptcy transaction. It must be approved by the court, which has set a hearing for Oct. 18.
The agreement can be terminated if is not consummated by Oct. 31.
Lordstown Motors filed Chapter 11 June 27 in U.S. Bankruptcy Court in Delaware. By that time, Burns and Rodriquez were long gone from the company, exits precipitated by a highly critical report published by Hindenburg Research.
In March 2021, Hindenburg accused company executives of misleading investors about demand for the Endurance and the company’s financial strength. “Lordstown is an electric vehicle SPAC with no revenue and no sellable product, which we believe has misled investors on both its demand and production capabilities,” the report warned. In fact, Lordstown’s claim of securing 100,000 preorders for the Endurance was “fictitious,” the report said.
Burns and Rodriguez resigned after an ensuing internal inquiry found “issues regarding the accuracy of certain statements regarding the company’s preorders.”
Burns received a $750,000 severance package to be paid over 18 months and was allowed to retain all of his shares in the company.
Between Nov. 16, 2021, and June 21, 2023, Burns liquidated all 46,351,745 shares that at one point comprised more than 26% of Lordstown Motors.
In his first sell-off, on Nov. 12, 2021, Burns jettisoned 3,204,000 shares worth $18.8 million at $5.88 per share.
On June 16, 11 days before the company that he founded filed for Chapter 11, the former CEO sold off his remaining 591,752 shares for a total of $3.9 million.
A complete analysis of Lordstown Motors’ insider stock sales shows that Burns’ total sell-off amounted to $66.8 million. Other than Burns, no other Lordstown Motors insider has sold stock since February 2021.
Numerous shareholder lawsuits have been filed against Burns and former investors and directors of Lordstown Motors. The company will continue to defend those lawsuits, paying its legal fees through directors and officers’ insurance policies currently in effect.
Pictured at top: Stephen S. Burns at a Lordstown Motors press event in 2020.
Dan O’Brien contributed reporting to this story
Copyright 2024 The Business Journal, Youngstown, Ohio.
