Lordstown Motors CEO to Receive $750K Severance
Updated 5:09 p.m. – LORDSTOWN, Ohio – The former CEO of Lordstown Motors Corp. will collect a handsome paycheck as the cash-strapped company he founded explores financing to stay in business.
According to a regulatory filing submitted to the U.S. Securities and Exchange Commission this morning, Steve Burns will collect a base pay of $750,000 over the next 18 months as part of a severance agreement negotiated with the company.
Lordstown Motors announced Monday that Burns and former chief financial officer Julio Rodriguez had resigned their positions. The company gave no reasons for their departure but described the exits as transitions “from the R&D and early production phase to the commercial production phase” of the business.
Rodriguez will be paid $200,000 in equal monthly installments over the next six months per the terms of his separation agreement, documents show. Both Burns’ and Rodriguez’s severance packages include non-compete and non-solicitation covenants for two years.
The company’s lead independent director, Angela Strand, has been appointed as executive chair and will oversee the organization’s transition until Lordstown Motors can find a permanent replacement for Burns. Becky Roof has been appointed as interim CFO and will serve in that position until the company completes its search for a permanent CFO.
In order to retain its executive management team through the transition period, the company said it has awarded Lordstown Motors president, Rich Schmidt, 500,000 shares of performance-based stock options under the company’s equity investment plan.
Guy Coviello, president and CEO of the Youngstown/Warren Regional Chamber, said in a statement that the organization is ready to work with the company’s new leadership.
“We look forward to working closely with Angela Strand and her team. She has very impressive credentials and should help take Lordstown Motors to the next phase of its evolution,” he said. “We welcome her to the community. Steve Burns was instrumental in putting Voltage Valley on the map. We thank him for that and wish him well on his next venture.”
The management shakeup at Lordstown Motors comes as the company is trying to secure financing to keep it afloat through next year. Last week, the company disclosed for the first time that the SEC had issued subpoenas regarding its investigation into the company’ s merger with DiamondPeak Holdings Corp., the blank check company that took Lordstown Motors public in October.
Lordstown said in an amended 10-K filing, filed June 8, that it needs to raise cash in order to stay in business into 2022. According to that document, Lordstown Motors had $587 million in cash as of March 31, not enough to bring its first commercial vehicle to market.
And the company revealed that it is in discussions with several unnamed entities to raise cash.
Curiously, in the June 8 filing, the company underscored its unwavering support for Burns.
“We are highly dependent on the services of Steve Burns, our chairman of the board and chief executive officer, and our largest stockholder,” the filing stated. “Mr. Burns is a significant influence on and a driver of our business plan. If Mr. Burns were to discontinue his service to us due to death, disability or any other reason, we would be significantly disadvantaged.”
No reference to how the company would be “significantly disadvantaged” was made in today’s announcement of the resignation of Burns.
According to regulatory filings, Burns holds 26.25% of stock in Lordstown Motors.
Burns had come under scrutiny after a blistering short-seller report issued in March by Hindenburg Research that accused the company of fabricating pre-orders for its all-electric pickup, The Endurance.
The report took issue with public statements made by Burns and others that suggested Lordstown Motors had secured more than 100,000 “pre-orders” of the vehicle. Instead, the Hindenburg report said that many of these pre-orders were actually non-binding letters of intent with third parties and not actual customers.
Moreover, the Hindenburg report said that the company did not have the adequate capital to begin production of the Endurance. Lordstown Motors has said it expects to start limited production of the truck in late September.
Lordstown Motors refuted most of these claims in a separate statement on Monday, releasing the results of a special committee selected to review the Hindenburg allegations.
“The special committee’s investigation concluded that the Hindenburg report is, in significant respects, false and misleading,” the company said. “In particular, its challenges to the viability of Lordstown Motors’ technology and timeline to start of production are not accurate.”
However, the committee found inaccuracies regarding statements related to the company’s pre-orders.
Although Lordstown Motors has “repeatedly disclosed that its letters of intent are non-binding” and has highlighted that these pre-orders may not be converted into actual orders, public statements about these orders were misleading, the committee said.
For example, Lordstown Motors has stated on several occasions that its pre-orders were from commercial fleets, when in fact they were obtained from fleet-management companies or other end users that were interested in purchasing the Endurance. Others were from potential “strategic partners” or third parties that had committed to solicit pre-orders but did not intend to purchase the pickup.
“One entity that provided a large number of pre-orders does not appear to have the resources to complete large purchases of trucks,” the committee found. “Other entities provided commitments that appeared too vague or infirm to be appropriately included in the total number of pre-orders disclosed.”
Public statements made by Burns nevertheless had referred to them as “serious orders.”
The founder of Hindenburg Research, Nathan Anderson, emailed The Business Journal shortly before noon today with a response to the special committee’s report.
“The top two executives don’t resign when allegations are meritless,” Anderson said. “Today’s disclosure largely verifies the concerns we raised in our report.”
Shares of Lordstown Motors, which trades under the ticker symbol, RIDE, had plunged more than 18%, to $9.33, by noon today. At the close of trading Monday, the share price had fallen to $9.26, or down 18.84%.
The stock closed Friday at $11.41 per share. On Monday, analyst R.F. Lafferty & Co. downgraded RIDE stock from “Hold” to “Sell” with a price target of $3.
Before forming Lordstown Motors in 2019, Burns was the founder and CEO of Workhorse Group, a Cincinnati- company that manufactures electric vans.
He had previously established and sold several other companies, including Over the Line/AdLink, which was sold to Gannett Co. in 1994; PocketScript, sold to ZixCorp in 2002; and MobleVoiceControl Inc., which developed speech recognition software for smart phones.
That company was sold to Nuance Communications in 2006, which today provides the speech-recognition engine for Siri.
Burns resigned his position at Workhorse in 2019 and later that year formed Lordstown Motors to acquire and retool General Motors’ former Lordstown Assembly plant. Workhorse Group retains a 10% interest in Lordstown Motors as a result of a technology-for-equity swap.
General Motors, which loaned Lordstown $50 million to purchase and retool its former plant, still holds a 4.5% stake in the company.
Copyright 2023 The Business Journal, Youngstown, Ohio.