Shares in electric vehicle start-up Lordstown Motors fell up to 12% during intraday negotiations on Thursday morning after the company confirmed that the United States Securities and Exchange Commission requested information on complaints from an uncovered seller who cheated investors.
Hindenburg Research accused Lordstown in a report last week of using “fake” orders to raise capital for its first product, a fully electric pickup truck called Endurance. The short seller claimed the truck was years away from production, but Lordstown says it is on track to start producing the vehicle in September.
Lordstown CEO Steve Burns declined to comment on the SEC’s investigation Thursday morning to CNBC. He told investors during the company’s first earnings conference call as a public company on Wednesday that it was “cooperating” with federal officials.
Burns said the company’s highly praised pre-orders of more than 100,000 pickups – a primary target of the Hindenburg report – were simply intended to gauge customer interest, not to confirm future sales. The company also classified pre-orders as “non-binding production reserves”, but Burns also referred to them as “very serious orders”.
“We have always been very clear, right? This is exactly what it should be. These letters of intent are not binding. They are called pre-orders in the real world,” he said on Thursday. CNBC’s “Squawk Box”. He later added, “I don’t think anyone thought we had real requests, right? That is not the nature of this business.”
Lordstown’s shares have fallen about 24% since Hindenburg released the report on Friday. The shares fell about 10% during intraday trading on Thursday morning. The company’s market capitalization is $ 2.3 billion.
The company on Wednesday also increased its guidance on capital and operating expenses for this year, largely citing decisions to accelerate the development of its second product (a van) and do more in-house production.
Lordstown went public through a special-purpose acquisition company, or SPAC, in October. It is among a growing group of electric vehicle start-ups that go public through deals with SPACs, which have become a popular way to raise money on Wall Street because they have a more streamlined regulatory process than traditional initial public offerings. .
Hindenburg’s report on Lordstown comes about six months after releasing a hard-hitting report on another Nikola EV-SPAC. That report also led to federal investigations, as well as the resignation of the company’s founder and president, Trevor Milton.
Short selling occurs when investors, mostly professional hedge fund managers, borrow shares from a broker and sell them in the hope of repurchasing them cheaper. If the stock falls, investors profit from the difference when they return the shares to the broker.