Lordstown Motors to Refute Short Seller’s Report
YOUNGSTOWN, Ohio – Lordstown Motors Corp. said it will release a comprehensive response in the next several days that challenges a scathing report issued last week alleging the electric-vehicle startup has misled investors.
“We will be sharing a full and thorough statement in the coming days, and when we do we will absolutely be refuting the Hindenburg Research report,” the company said in a statement.
Hindenburg Research, a market short seller, on Friday released a report that alleged Lordstown Motors misled investors through public statements related to the preorders and production of its new all-electric pickup, the Endurance. The company wants to begin production of the pickup in September.
The report was issued less than a week before Lordstown Motors is scheduled to deliver its first earnings report as a public company after the market closes March 17.
Hindenburg said in its report that Lordstown Motors’ assertions that it has obtained more than 100,000 “serious orders” of the Endurance “appear to be fictitious,” consisting of an order book made up of “fake and entirely non-binding orders, from customers that generally do not even have fleets of vehicles.”
The report, titled “The Lordstown Motors Mirage: Fake Orders, Undisclosed Production Hurdles and a Prototype Inferno,” also alleges that the company paid third parties to generate preorders for the vehicle.
Lordstown CEO Steve Burns, in an interview with The Wall Street Journal on Friday, said the company has always been forthcoming about its potential sales, and never classified advanced demand for the Endurance as “orders.”
Hindenburg is renowned for taking short positions on company stock prices, that is, these investors stand to profit when shares drop. Shares of Lordstown Motors closed down 16.5% on Friday in the wake of the report.
Investors such as Hindenburg have recently targeted companies that have used SPACs, or special purpose acquisition companies, to vault them into public trading.
According to a Wall Street Journal story published Sunday, the dollar value of short sellers betting against SPACs has grown three-fold since the beginning of this year.
Lordstown Motors went public in October under the ticker symbol “RIDE” after it merged with SPAC DiamondPeak Holdings Corp.
In the wake of the report, it didn’t take long for national law firms that represent investor interests to announce their own investigations of Lordtown Motors.
By Friday evening, New York firm Kaplan Fox & Kilsheimer LLP, Schall Law Firm in Los Angeles, Rosen Law Firm in Los Angeles, and Kessler Topaz Meltzer & Check LLP of Radnor, Pa., all announced inquiries into the possibility of class action suits against Lordstown Motors.
Earlier this month, the Rosen Law firm filed a class action suit on behalf of investors against Cincinnati-based Workhorse Group, which has a 10% stake in Lordstown Motors and was founded by Lordstown Motors CEO Burns.
The company was rebuffed for a lucrative contract with the U.S. Postal Service worth an estimated $6.3 billion over 10 years. It was likely that Lordstown Motors would have engaged in some form of manufacturing for the program.
The complaint, filed in the U.S. District Court for Central California, alleges that Workhorse failed to disclose “adverse facts pertaining to the company’s business, operational, and financial results.”
Copyright 2021 The Business Journal, Youngstown, Ohio.