CLEVELAND, Ohio – An investor in Lordstown Motors Corp. filed a lawsuit against the electric truck manufacturer on Thursday, alleging that it offered false and misleading information about the vehicle and the time needed to start production.
Matthew Rico filed the document with the United States District Court in Youngstown just days after an analyst reported that the company’s orders for its vehicles “are largely fictional and used as a support to raise capital and confer legitimacy.” Amid the report, the United States Securities and Exchange Commission launched an investigation into the business.
Rico’s lawyers are seeking class action status to include other investors. The lawsuit says the company “made false statements of material fact” and omitted other information that prompted investors to pay artificially inflated prices for the company’s shares.
Company employees did not return emails requesting comments on this story.
The lawsuit comes just days after financial analyst Hindenburg Research wrote a headline report: “The Lordstown Motors Mirage: False Orders, Undisclosed Production Obstacles and a Prototype from Hell”.
The report, cited throughout the process, says that the company’s first flagship truck test drive, the Endurance, caught fire 10 minutes after it hit the road. The report also says that Lordstown Motors Corp. “Has no revenue or salable product”.
The truck company is building its fleet at the former General Motors plant in Lordstown, near the Ohio Turnpike, in Trumbull County. General Motors closed its Chevy Cruze line in March 2019, which left more than 1,000 employees unemployed. Lordstown Motors later bought the factory.
Rico’s lawyer, Jeffrey Block, said in an interview that the company’s announcement of thousands of vehicle pre-orders has prompted many investors to support the venture. The suit, citing the Hindenburg report, says that many of the pre-orders were false and non-binding. The company’s chief executive, Stephen Burns, paid for customers to reserve “worthless, non-binding pre-orders” desperate to claim a demand for the vehicle, the lawsuit says.
The document also cites a report last month on Yahoo Finance that quoted Burns as saying, “We have previously sold 100,000 of these vehicles to various fleets across America.”
In a statement in January, the company said the number of orders “is unprecedented in automotive history”.
“Adding to the interest we have in the federal, state, municipal and military fleets on top of that, I think you can see why we think we are about to revolutionize the truck industry,” Burns said in the statement.
In an interview with MSNBC on Thursday, Burns said the orders were simply to gauge interest in the vehicles.
“I don’t think anyone thought we had real orders,” said Burns.
The lawsuit says Lordstown Motors tried to start production in September. The process, however, says that “it is not and has not been ‘on the way’ to start production of Endurance in September”.