The troubles for Lordstown Motors are growing as federal prosecutors just opened an investigation into the battery-electric truck maker and some of the claims it’s made as well as its reverse merger.
The company has been battling not only the usual woes associated with starting a fledgling auto company but also shareholder lawsuits and scrutiny by the U.S. Securities and Exchange Commission in the form of two subpoenas. The new investigation, revealed in a regulatory filing Thursday, just adds to the company’s woes.
After striking a deal with General Motors to take over the no-longer-needed plant in Ohio, the company rode a wave of goodwill and optimism that seemingly buoyed a raft of nascent EV makers, such as Fisker Inc., Rivian, Lucid Motors and others.
However, as time has gone on, there were rumblings about the truthfulness of statements coming from now-former CEO Steve Burns about the progress the company was making. All of that came to a head when noted short-sellers Hindenburg Research issued a report claiming the company was exaggerating the number of orders it had for its vehicles and calling Burns a “con man.”
Tough times endured — and to come
Burns moved quickly to try to quell the rising tide of doubt about the company’s ability to make good on the claims he’d made. More importantly, it was unclear if the company would even have enough funding to make through the end of the year.
Despite repeated efforts to assuage investors and analysts, Burns and CFO Julio Rodriguez resigned from their positions in mid-June. However, their departure from the company wouldn’t end the constant speculation about the company’s fate — nor would it prevent executives from making another massive gaffe.
Their departures came just a few days before the pair and others were expected to meet with reporters in Detroit to discuss the status of the company during a virtual meeting of the Automotive Press Association.
“It’s a new day at Lordstown,” newly appointed executive chairwoman Angela Strand said during her opening remarks. “There are no disruptions and will be not disruptions to our day-to-day operations.”
Shortest new day ever
During that June 15 meeting, newly appointed president Rich Schmidt attempted to reassure everyone that the company was in better shape than many — especially Hindenburg — believed. He said the company had enough “binding” orders to keep it running for all of 2021 and through May 2022.
“Those are firm orders we have for those two years,” he said.
“I don’t know the exact facts of the legal aspect of that, but they are basically binding orders that are committed here in the last two weeks, reconfirmed orders,” he said. “They’re pretty solid, and I think that’s on the light side or conservative side.”
Schmidt also confirmed production would begin, as planned, at the end of September with the first production-ready vehicle set to be delivered in 2021. Three days later, the company recanted Schmidt’s earlier statements during the meeting, saying the company had no “binding orders” in a filing with the SEC.
“(A)lthough these vehicle purchase agreements provide us with a significant indicator of demand for the Endurance, these agreements do not represent binding purchase orders or other firm purchase commitments,” the company said in the filing.