Lordstown Motors gets SEC scrutiny over short-seller Hindenburg's claims

SAN FRANCISCO — Lordstown Motors said on Wednesday it had received a request for information from the U.S. securities regulator regarding accusations by an investor that took a short position in the stock and accused the electric truck startup of misleading consumers and investors.

Last week, Hindenburg Research revealed it had taken a short position in Lordstown Motors, accusing the company of using "fake" orders to raise capital and claiming that its upcoming truck is three to four years away from production.

"We are cooperating with that inquiry," Lordstown Motors CEO Steve Burns said during an earnings conference call, referring to the U.S. Securities and Exchange Commission's request for information.

He also said Lordstown's board of directors has formed a special committee to review the matters.

Burns said Lordstown won’t directly address Hindenburg’s accusations. The truck is on schedule to be built in September, with a plan to build its test vehicles this month, Burns said, a timeline Hindenburg’s report had doubted.

Interest from customers indicates strong demand, Burns said. Lordstown and founder Burns were accused of misleading investors by exaggerating orders for the Endurance.

“Our interaction with our customer has allowed us to gauge demand,” Burns said on the call. “This gauge is important because tooling can cost hundreds of millions of dollars. We are in the process of expanding our production capacity to 60,000 trucks a year.”

Short sellers bet that the price of a stock will fall by borrowing shares in the hope of buying them back at a cheaper price and pocketing the difference.

Shares of Lordstown Motors were down 5% in extended trading on Wednesday.

"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," Hindenburg said last Friday.

Burns, in a text message to Bloomberg, addressed that accusation, saying "we always stated that pre-orders were non-binding. That is what pre-orders are."

He said Wednesday that customer interest had exceeded the company's expectations.

The company in 2019 acquired a shuttered General Motors plant in Lordstown, Ohio.

It also plans to unveil the demonstration model of its second vehicle, an electric van, this summer, with a goal to start production in the second half of 2022.

Lordstown reported a loss of 23 cents per share during the October to December quarter.

In its report, Hindenburg said Lordstown is a company “with no revenue and no sellable product, which we believe has misled investors on both its demand and production capabilities.” 

But the company has been upfront about not having revenue from vehicle sales, and is spending cash getting its truck into production.

The company had $630 million in cash at the end of the year. With projected capital expenditures of $250 million to $275 million in 2021, and $220 million to $235 million in operating costs and R&D, Lordstown expects to finish this year with at least $200 million in cash. The company is applying for a loan from the U.S. Department of Energy under the Advanced Technology Vehicles Manufacturing program.

Material from Bloomberg was used in this report.