Angry shareholders filed at least three lawsuits against Lordstown Motors for fraud in U.S. District Court, demanding compensation from the cash reserves the company says it is planning to use to launch its battery-electric pickup truck this fall.
The startup company, housed in an old General Motors plant to produce its truck, has yet to file a response to any of the lawsuits. The first suit against Lordstown was filed March 18.
The lawsuits, which was filed in the U.S. District Court for the Northern District of Ohio’s Youngstown Division, comes on the heels of disastrous week for the fledgling electric vehicle company. It began with the devastating research report by Hindenburg Research that sent the company’s stock tumbling.
The company followed that with an unsatisfactory earnings call during which the executives failed to answer the issues raised in the report.
Plaintiffs hit EV startup hard
The lawsuit, filed on behalf of Matthew Rico, who identifies himself as Lordstown shareholder, “Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) the Company’s purported pre-orders were non-binding; (ii) many of the would-be customers who made these purported pre-orders lacked the means to make such purchases and/or would not have credible demand for Lordstown’s Endurance; (iii) Lordstown is not and has not been ‘on track’ to commence production of the Endurance in September 2021; (iv) the first test run of the Endurance led to the vehicle bursting into flames within 10 minutes; and (v) as a result.”
Rico also is asking that his lawsuit be certified as a “class action” that would cover all of Lordstown shareholders damaged by the company’s misconduct.
Hindenburg Research, a short-seller group, claimed the EV truckmaker either faked or overstated claims that it has advance orders for 100,000 of the electric pickups it plans to launch later this year. Further, the group described Lordstown CEO Steve Burns as a “con man.”
The tenor of the Hindenburg report echoes a study it put out last year on Nikola Corp., which also used a SPAC deal to go public, initially generating a big run up in its share price while also lining up a proposed alliance with General Motors.
Lawsuit targets Lordstown executives
The lawsuit names several Lordstown executives, starting with CEO William Burns, as defendants. The suit is built around the statements, including documents the company filed with the Securities and Exchange Commission and various press releases by the company that “were materially false and misleading at all relevant times.”
“The Individual Defendants, because of their positions at the Company, possessed the power and authority to control the content and form of the Company’s annual reports, quarterly reports, press releases, investor presentations, and other materials provided to the SEC, securities analysts, money and portfolio managers and investors,” contend in the filing.
Instead, the lawsuit said Lordstown executive “authorized the publication of the documents, presentations, and materials alleged herein to be misleading prior to its issuance and had the ability and opportunity to prevent the issuance of these false statements or to cause them to be corrected,” going back to when the company went public via a SPAC in August 2020.
The SPAC generated $675 million in cash, money it is using to finish development of its new Endurance model. Lordstown officials claimed they received more than 100,000 non-binding production reservations from commercial fleet users, which the aforementioned Hindenburg report contends is untrue.
The lawsuit added the defendants from Lordstown “knew that the adverse facts” had not been disclosed and were being concealed from the public and that the positive representations being made were false and misleading, making them liable for damages suffered by shareholders.