Lordstown Motors Corp.
It said its CEO and chief financial officer have resigned, decisions that come amid a new report from a board committee that says some aspects of the disclosures it made about truck pre-orders were inaccurate.
Lordstown Motors, which plans to build electric trucks in a former General Motors Co.
assembly plant in Ohio, said Monday that Steve Burns, its CEO, and Julio Rodriguez, its chief financial officer, have retired from the company. Burns also stepped down from the company’s board of directors, according to Lordstown Motors.
Burns declined to comment. Efforts to reach Rodríguez, including requesting comment through a company spokesperson, were unsuccessful.
Shares of Lordstown Motors fell 20% on Monday morning to around $ 9.10 a share, its biggest percentage decline since it went public last fall.
The company said Monday that a board committee found that some disclosures made about pre-orders for its next electric truck, the Endurance, were inaccurate in certain respects, partially confirming the claims outlined in a March report from the short seller. Hindenburg Research. The committee rejected other aspects of the short seller’s report, such as the claim that a September launch date for the Endurance was unrealistic, the company said.
The committee was established to investigate allegations made by Hindenburg, which in its report said that Lordstown Motors had misled investors about the strength of its pre-order bookings and progress toward starting production of an electric truck. The company has said it plans to start building the Endurance, its first model, in September.
Hindenburg founder Nathan Anderson said Monday’s disclosures by the company largely verify the concerns raised in its previous report. “The top two executives don’t resign when the allegations are unfounded,” he said.
The leadership changes are the latest in a series of setbacks for the electric truck startup, which went public last year through a reverse merger with a special-purpose acquisition company, or SPAC.
The Ohio-based company said in a disclosure last week that it does not have enough cash on hand to begin full commercial production and has questions about whether it can continue as a going concern through the end of the year.
Lordstown Motors also disclosed at the time that weaknesses in its internal controls over financial reporting could have resulted in material misstatements in its financial statements. The news sent its shares down and, at the close of Friday, they were down 43% for the year.
The Securities and Exchange Commission has also launched an investigation related to the Lordstown Motors SPAC merger and pre-orders for the company’s vehicles. The electric truck maker has disclosed that it received two subpoenas and said it was cooperating with the investigation.
The shift at the top is an important first step in moving the company forward, but investors should anticipate volatility around their strategic partnerships and timelines during the transition, Morgan Stanley analyst Adam Jonas wrote in a note Monday. .
“We felt that it was unsustainable for the company to secure the new capital needed with a management team that is not considered to be able to take the company into the next era of development,” he added.
Angela Strand, the company’s principal independent director, has been named CEO of its board of directors. He will oversee Lordstown Motors for a transition period until a permanent CEO is hired, the company said.
“We remain committed to meeting our production and marketing goals, maintaining the highest standards of operation and performance, and creating value for shareholders,” said Ms. Strand.
Lordstown Motors and Burns had previously pointed to their pre-order book to underscore the strength of demand for their next commercial truck and to promote their business to investors.
“Most of them are signed by the CEOs of these big companies,” Burns said of the pre-orders in a CNBC interview in November. “They are very serious orders.”
In a regulatory disclosure in December, Lordstown Motors said it had no current customers or backorders, and there was no guarantee that non-binding pre-orders would turn into sales. In a January press release, Lordstown Motors said the more than 100,000 reservations for its Endurance truck were not binding.
Hindenburg, in his report, described those orders as not only non-binding but also “largely fictitious” and did not represent a “genuine demand.”
The New York-based research firm said it spoke with several companies and municipalities that the company felt had pre-ordered.
Some pre-orders for 1,000 trucks or more came from companies that did not operate commercial fleets, Hindenburg said. Others with pre-orders told the company that they had neither the means nor the intention to buy the number of trucks tied to the reserve, according to the short seller’s report.
The special committee of the Lordstown Motors board found that an entity that provided a large number of pre-orders does not appear to have the resources to complete large truck purchases. Others were from fleet management companies or influencers who tried to get pre-orders but did not plan to buy the trucks themselves, the committee found.
However, the board committee rejected the short seller’s claims that a September production start for the Endurance was unrealistic. In its report, the committee said that while several factors could delay the start date, the September launch is still feasible and commercial deliveries should begin in the first quarter of 2022.
Lordstown Motors also said Monday that, among other personnel changes, Becky Roof will serve as interim CFO and that Jane Ritson-Parsons has been named COO.
Lordstown Motors came into the national spotlight when it took over the GM factory in Ohio City that inspired the startup’s name. GM’s decision in late 2018 to close the factory and potentially relocate its roughly 1,400 workers was harshly criticized by then-President Donald Trump.
Burns formed Lordstown Motors in April 2019, shortly after leaving another startup, Workhorse Group Inc., where he was CEO. Under his leadership there, Workhorse aimed to build large electric delivery trucks, as well as personal drones and helicopters.
That following November, Lordstown Motors bought the plant from GM for a purchase price of $ 20 million through a loan that the Detroit automaker made to the startup and later forgave, according to company documents. At the time, Burns said the plant acquisition would help the startup bring the Endurance to market more economically than if it had to start from scratch.
As electric vehicle companies became some of the biggest investments in the market last summer, Lordstown Motors benefited from an explosion of merger deals involving SPAC. In these deals, a publicly traded SPAC is merged with another company to go public outside of the traditional initial public offering process. Deals often provide startups with an injection of capital.
Last August, Lordstown Motors said it would merge with a real estate-focused SPAC, DiamondPeak Holdings Corp., in a deal that valued the combined entity at $ 1.6 billion. The reverse merger injected Lordstown Motors with $ 675 million in fresh capital, when it closed later that fall.
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