Lordstown Motor, an electric pickup startup that became a billion-dollar company after going public, is watching its advertising train slow down after a prototype caught fire and its vast order backlog was questioned.
The company was founded out of an agreement to take over the GM plant in Lordstown just a few years ago, and they plan to put an electric pickup into production this year.
We stated earlier that the schedule was extremely ambitious due to the fact that the factory needs to be completely redone and Lordstown is trying to bring to market the first passenger vehicle with wheel hub engines, which is an untested truck technology.
Lordstown went public through an agreement with SPAC last year and saw its valuation rise to $ 4 billion.
The company has seen its stock prices in several ads, including the fact that it has secured more than 100,000 orders for its Endurance pickup.
Now, Lordstown’s rise in the stock market has stopped, as shares have fallen 45% in the last month and the company’s market capitalization has dropped to $ 2 billion.
Part of the drop is attributed to a report by Hindenburg Research, which made its name by taking down Nikola Motors last year. The company highlighted many problems with some of Lordstown’s claims, as well as a major setback in its testing program.
They shared a police report describing one of Lordstown’s first prototypes on fire in Michigan in January.
The official wrote in the report:
Upon arrival, I watched the truck fully engulfed on 12 Mile Road. lanes east of Copper Creek Lane.
I spoke to the driver of the vehicle. Pirakalathan Pathmanathan, who informed me that he was the director of the Lordstown Motors power train. Pathmanathan explained that the vehicle was a 2021 Lordstown Endurance that passed tests within the facility. Pathmanathan said this was the first road test for Endurance and added that it is a fully electric truck. Pathmanathan said he took two of his co-workers, Simone Palombi and Akshay Sharma, to the road test with him and they stayed in it for about 10 minutes before it caught fire.
I asked Pathmanathan what happened and he said that they were driving the vehicle and noticed that the truck was driving in a strange way. Pathmanathan said he stopped and the Endurance [caught] on fire under the truck.
Here are some pictures of the incident:
Lordstown said the problem was due to a “human error” and vehicle assembly and says the process has now been automated, which should solve the problem.
However, it is difficult not to consider this a setback in the Lordstown testing program, which has little time to complete before production.
But the incident was not really the focus of Hindenburg’s report, which mainly revolves around the quality of Lordstown’s “orders” for the Endurance pickup.
Hindenburg delved into some of these agreements to demonstrate that most of them are not binding and, in some cases, they even talked to the companies that placed these “orders” and admitted that they have no plans to fulfill the orders:
- The company has consistently pointed out its portfolio of 100,000 pre-orders as evidence of the high demand for its proposed EV truck. Our conversations with former employees, business partners and an extensive review of documents show that the company’s orders are largely fictional and used as a support to raise capital and confer legitimacy.
- For example, Lordstown recently announced a deal for 14,000 trucks from E Squared Energy, reportedly representing $ 735 million in sales. And Squared is based on a small residential apartment in Texas that does not operate a vehicle fleet.
- Another order for 1,000 trucks, $ 52.5 million, comes from a two-person startup that operates in a Regus virtual office with a mailing address in a UPS Store. We spoke to the owner, who acknowledged that he will not actually order any vehicles, instead described the “pre-order” as a mere marketing relationship.
- Another company that was supposed to buy 500 trucks from Lordstown told us: “… Letters of interest are not binding. It is not as if you were obliged to pre-order or commit yourself contractually to buy this truck. They are not like that ”.
- Lordstown CEO Steve Burns called these deals “very serious requests”. The actual customer contracts, which we introduced for the first time today, do not require a deposit and are not binding. Many of the alleged customers do not operate fleets nor do they have the means to actually make the stated purchases.
The company presents some significant evidence of these claims in its report, but discloses that the publication of its research was motivated by a short position they took on Lordstown’s shares.
Following the report, the SEC reportedly launched an investigation into the company, which is taking place very similarly to the events following the Hindenburg report on Nikola Motors.
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