Lordstown Motors Corp. shares took their biggest one-day drop ever after its two top executives stepped down and the electric truckmaker’s board found evidence of inaccurate statements, dimming the shine of the onetime SPAC star.
Chief Executive Officer Steve Burns and Chief Financial Officer Julio Rodriguez have resigned from the company, effective immediately, the company said in a statement Monday. Burns declined to comment about his exit in a text message.
It is the latest setback for the company, which warned last week it might not have enough cash to fund the development of its first truck or even survive the next 12 months if it can’t raise more capital. In March, the startup disclosed a Securities and Exchange Commission probe of its operations after a short seller said its technology was flawed and that preorders for its truck were nonbinding.
Shares of the company sank 19% to close at $9.26 — the lowest in almost three weeks. The stock is down 54% this year and more than 70% below its closing high of $31.40 in September.
It may come under further selling pressure from “potential stock disposals” by Burns, who is the single largest shareholder with a 26.5% stake, Adam Jonas, an analyst at Morgan Stanley who recently pulled his rating on Lordstown, wrote in a research note.
Lordstown is one of a slew of electric-vehicle startups that have gone public through mergers with so-called special purpose acquisition companies, or SPACs, which have been controversial because they’ve made public companies out of young ventures with little in the way of revenue or commercially viable products. It combined with DiamondPeak Holdings in an October deal that netted Lordstown $675 million.
The company said in a separate statement that a board investigation concluded it had made misstatements about its vehicle preorders. The probe cited instances when the startup inaccurately claimed preorders came from commercial fleets, instead of from third-party management companies or “influencers” that didn’t plan to purchase trucks directly.
It also found that some of the preorders were placed by ostensible buyers unlikely to have the resources to complete the orders or whose commitments were “too vague or infirm to be appropriately included in the total number of preorders disclosed.”
In a March report, short-seller Hindenburg Research called the 100,000 preorders for its truck “fictitious.”
As recently as last month, Burns told analysts on a conference call that Lordstown had halted preorders at 100,000 vehicles but had begun accepting an additional 23,000 “vehicle purchase agreements,” most of which included down payments.
Lordstown’s board concluded that other allegations made by short seller Hindenburg Research in March were “false and misleading” in many aspects.
The company’s lead independent director, Angela Strand, has been named executive chairwoman, and she will oversee the company until a new CEO is identified. Becky Roof, who has previously served as an interim finance chief at other corporations, will do the same at Lordstown.
“We remain committed to delivering on our production and commercialization objectives, holding ourselves to the highest standards of operation and performance and creating value for shareholders,” Strand said in the statement.
Short seller Hindenburg alleged that Burns had been forced out of his former company, electric-van maker Workhorse Group Inc. He left that company in 2019 and founded Lordstown. Burns denied Hindenburg’s allegations.
Burns’s abrupt departure and Lordstown’s finding that it made misstatements under his tenure are eerily similar to what transpired at Nikola Corp., another electric-vehicle startup that went public via a blank-check company. Nikola’s founder and CEO also stepped down after Hindenburg targeted the company for misleading investors, something the startup later confirmed.
Lordstown drew attention to itself when it acquired a shuttered General Motors Co. factory in Youngstown, Ohio, where it plans to manufacture its own vehicles. The move was lauded by President Donald Trump’s administration after he had promised to bring back work to the thousands of workers who lost jobs when the plant was closed in 2019.
The exit of Lordstown’s two top executives comes at a difficult time for the company as it attempts to transition from research and development into commercial production of its first model.
The company is trying to build a unique electric pickup — with a motor at each wheel. That makes it an engineering challenge. It is working with technology licensed from Elaphe Propulsion Technologies of Slovenia to produce the motors. Lordstown’s board rejected an allegation from short seller Hindenburg that the technology isn’t workable in a commercial vehicle.
“While hub motors have not previously been used at scale in commercially-produced passenger vehicles, the hub motor technology licensed from Elaphe is viable,” it said in the report.
But Morgan Stanley’s Jonas said the technology may prove to be a headwind Lordstown can do without in the post-Burns era.
“It is our understanding that Steve Burns was the primary proponent of the hub motor system,” he said. “While a change of architecture would add as much as a year or two to the start of production, we believe moving to an alternative motor strategy or an entirely different product and go-to-market strategy altogether may be required to preserve sustainable equity value.”