Lordstown Motors Takes a U-Turn on Orders
Lordstown Motors (NASDAQ: RIDE) offered investors some hope earlier this week when executive Rich Schmidt said the embattled electric vehicle (EV) startup had “binding orders” that would cover the first two years of production.
“Currently, we have enough orders for production for ‘21 and ‘22,” Schmidt commented at an Automotive Press Association event on Tuesday. “Those are firm orders we have for those two years.”
That announcement came a day after Lordstown ousted CEO Steve Burns and CFO Julio Rodriguez following a special investigation conducted by the board of directors to assess claims made by short seller Hindenburg Research. The investigation had concluded that Lordstown Motors had previously made inaccurate statements regarding pre-orders.
The stock had soared on Tuesday following Schmidt’s remarks, sending shares up 11%. It turns out that Schmidt spoke too soon and Lordstown quickly backtracked the statements.
About those orders
In a regulatory filing, Lordstown conceded that the purchase agreements it has inked are not actually binding.
“To clarify recent remarks by company executives at the Automotive Press Association online media event on June 15, although 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 wrote in the filing. “As previously disclosed in our [amended annual report] for the year ended December 31, 2020, filed with the Securities and Exchange Commission on June 8, 2021, to date, we have engaged in limited marketing activities and we have no binding purchase orders or commitments from customers.”
Lordstown adds that the vehicle purchase agreements that it has with fleet management companies designate the company as a preferred supplier while establishing other terms such as down payment requirements and order procedures, but that the agreements may be terminated by either party at any time and do not commit the counterparties to purchase vehicles.
Following the disclosure, the stock dipped by as much as 10% in pre-market trading, but was able to recover after the open. Shares climbed and briefly edged into positive territory before dipping back into the red. As of 11:30 a.m. EDT, Lordstown shares were down 2%.
Strengthening the executive team
Separately, Lordstown also said on Thursday that it had hired John R. Whitcomb to lead the company’s go-to-market strategy. Whitcomb is an industry veteran and most recently served as Director of Global Retail and Sales Technology at General Motors (NYSE: GM).
Whitcomb is tasked with developing a strategic business model for Lordstown’s sales and service strategy, including a plan to build out a national sales network. The executive will also be in charge of assessing international opportunities for potential expansion in the future.
A bumpy road ahead
Overall, Lordstown remains in a precarious position. The company warned last week that it may run out of cash before it can commence production, but suggested that it has additional ways to raise capital. GM is a strategic investor and Lordstown may be able to secure additional funding from the legacy automaker.
Still, the history of inaccurate statements doesn’t instill a lot of confidence in investors.
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