Lordstown Motors Stock Craters as CEO and CFO Step Down
It’s been a brutal couple of weeks for Lordstown Motors (NASDAQ: RIDE). The electric vehicle (EV) startup warned investors last week that it was running out of cash and lacking the necessary money to start production of the Endurance, the electric pickup truck the company has been developing. Lordstown may not be able to continue as a “going concern,” the accounting term for a company being financially sustainable.
Lordstown has now announced that both its CEO Steve Burns and CFO Julio Rodriguez are resigning, causing the stock to crater. As of 12:05 p.m. EDT on Monday, Lordstown shares were down 19%.
Burns is out… again
Burns has stepped down as CEO and also resigned from the board of directors. Lordstown’s lead independent director Angela Strand has been appointed Executive Chairwoman, and she will oversee the leadership transition until the company can find a new permanent CEO. Rodriguez has been ousted, with Becky Roof to serve as interim CFO. Lordstown has retained an executive search firm to assist in finding new replacements for a permanent CEO and CFO.
This is the second time that Burns has stepped down as CEO of an EV startup in just a few years. Burns had also founded Workhorse (NASDAQ: WKHS) and resigned as chief executive of that company in early 2019 to found Lordstown.
Despite the official warnings in regulatory filings that suggest that Lordstown may not be able to start commercial production, the company says it is preparing to transition to the “commercial production phase of its business.”
“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 commented in a release. “Along with the management team, I will continue to work closely with them and the Board to execute on Lordstown’s vision for the future of electrified transportation.”
Adding insult to injury
Making matters worse, Lordstown separately announced that it had concluded a previously-disclosed special investigation into allegations made in March by short seller Hindenburg Research. The bearish investor had made some troubling accusations around Lordstown’s technology, ability to start production, and customer demand.
The investigation concludes that Hindenburg’s report is “false and misleading” with regards to the allegations around Lordstown’s technology and production timeline. However, the investigation validated some of the short seller’s claims regarding the accuracy of statements related to pre-orders.
Hindenburg had alleged that many of Lordstown’s pre-orders were non-binding commitments from customers who do not actually operate vehicle fleets, suggesting that many prospective customers won’t be able to complete the purchases. Lordstown insists that it has always been upfront with investors, disclosing that pre-orders are non-binding and typically only require a refundable $100 deposit.
However, the company conceded that it had made some inaccurate disclosures in the past. Lordstown had previously said that pre-orders were “primarily” from commercial fleet operators, but many of these pre-orders were in fact obtained by fleet management companies that expressed interest and some were placed by strategic partners that secured pre-orders from entities that had no intention of buying Endurance trucks.
An unidentified entity placed a large number of pre-orders, but “does not appear to have the resources to complete large purchases of trucks.” Other organizations vaguely expressed interest, and these commitments should not have been included in disclosed pre-orders.
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