Shares of Lordstown Motors Plunge on Short Seller Report
YOUNGSTOWN, Ohio – Shares of Lordstown Motors Corp. plummeted more than 19% Friday after Hindenburg Research released a report alleging the electric truck manufacturer has misled investors.
“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,” according to the Hindenburg report.
Lordstown Motors is in the process of conducting beta testing on its new all-electric pickup, the Endurance. It plans to start full production of the vehicle in September.
The company said earlier this year that it had received more than 100,000 preorders of the truck, a claim that Hindenburg disputes. Lordstown Motors said the orders were nonbinding.
“Our conversations with former employees, business partners and an extensive document review show that the company’s orders are largely fictitious and used as a prop to raise capital and confer legitimacy,” the report said.
The Hindenburg report, “The Lordstown Motors Mirage: Fake Orders, Undisclosed Production Hurdles and Prototype Inferno,” alleges that the consulting group Climb2Glory was “paid to generate preorders” for the company.
Hindenburg cited particular claims by Lordstown Motors, such as an announcement the company had secured preorders from E Squared Energy for 14,000 trucks in a $735 million deal placed in December 2020. At the time, the deal represented about 17.5% of Lordstown Motors’ preorders, the report states.
According to Hindenburg, E Squared Energy is based out of a small residential apartment in Texas that doesn’t operate a vehicle fleet.
The research firm also said it spoke with the owner of a two-person startup called Innervations LLC that operates out of Regus virtual office with a mailing address at a UPS Store who allegedly preordered 1,000 trucks. The announcement for the some $52.5 million order was made on April 7, 2020, leading up to Lordstown Motors’ IPO transaction, the report states.
Hindenburg reports Innervations was formed about four months before the announcement, citing Florida corporate records.
The owner told Hindenburg that it does not intend to order any vehicles and the pre-order is a mere marketing relationship.
Another company representative that said it would purchase 40 vehicles through Climb2Glory told Hindenburg: “I’m not committed to anything, not to buying a single vehicle. I committed to consider buying vehicles. I’d have a lot of questions before I commit to anything,” according to the report.
In its report, Hindenburg provides details from conversations with companies that submitted preorders citing the letters of intent were “promotional.” And while the non-binding agreements don’t require to a commitment to buy, they include a clause encouraging a press release to announce the deal, according to the report.
“Typically, the goal behind generating pre-orders is to capture actual product demand,” according to the report. “But a Lordstown partner that helped generate pre-orders acknowledged that the goal was to boost investor confidence in order to raise capital: ‘Fundraising was directly linked to pre-order generation – the faster the pre-orders arrived, the greater the investors’ confidence would be in the company and the faster funds would flow in.’ ”
The report discloses “We are short shares of Lordstown Motors Corp.”
As of this posting, Lordstown Motors has not responded to The Business Journal’s request for comment on the report.
Hindenburg Research, an investment research firm that focuses on short selling, last year released a report that targeted EV automaker Nikola as an “intricate fraud built on dozens of lies.” The report triggered an inquiry by the U.S. Securities and Exchange Commission that is ongoing.
Copyright 2021 The Business Journal, Youngstown, Ohio.