Electric truck boot Lordstown Motors Corporation (NASDAQ: RIDE) furiously questioned a report by Hindenburg Research that accuses the company of doing fraudulent marketing of itself.
What happened: Hindenburg’s report “The Lordstown Motors ‘Mirage’: False Orders, Undisclosed Production Obstacles and A Prototype from Hell” details an investigation into how the company promotes itself and its Endurance electric truck.
“Lordstown is an EV SPAC without a prescription and without a salable product, which we believe has grossly misled investors in their demand and production capacity,” said Hindenburg, claiming that the company “pointed to its 100,000 order portfolio as proof of demand for your proposed EV truck. Our extensive research reveals that the company’s orders seem largely fictitious and used as a support to raise capital and confer legitimacy. “
The Hindenburg report added that Lordstown paid consultants to generate pre-orders prior to its initial public offering last October, adding that former Lordstown employees described the company’s founder and CEO Steve Burns as a “con man” or a “PT” figure Barnum “.
In an interview with the Wall Street Journal, Burns acknowledged hiring consultants to generate pre-orders, but said that this was done to assess market demand. He told the publication that the pre-ordered book was never misrepresented.
“We are not claiming that they are orders and we have never stated that,” he said.
The Journal also noted that Lordstown Motors stated that it had no customers or orders pending in a December regulatory process, noting that there was no guarantee that non-binding pre-orders would transition to sales.
In a January press release, Lordstown Motors said the more than 100,000 reservations made for its Endurance truck were not mandatory.
Burns told the Journal that some of the companies that placed orders were not fleet operators, but their intermediaries.
“If a guy signed a piece of paper that said ‘I think I can move x-thousand of them’, we believe him,” he said. “But it’s not in the blood. It is a non-binding letter of intent. “
What else happened: The Hindenburg report also said that Lordstown Motors allegedly closed a $ 735 million deal for 14,000 trucks with E Squared Energy, which Hindenburg said “is based on a small residential apartment in Texas that does not operate a vehicle fleet.”
Tim Grosse, CEO of Texas-based E Squared Energy, came to the defense of Lordstown Motors.
The Hindenburg report said that Grosse answered its questions about Lordstown Motors “with a very Alice in Wonderland answer”, insisting that its pre-order was an “estimate” based on Lordstown’s planned production, not demand of the customer.
“It is mainly based on Lordstown production,” said Grosse, according to the Hindenburg report. “In the first year they will be somewhat limited with just 20,000 vehicles and we have 2,000 in the LOI and in the second year we have 4,000 and production will be around 40,000. And in the third year we are rising to 8,000 … That is what we are estimating. “
Still, Grosse offered a bleak view of Hindenburg in an interview with the Business Journal of Youngstown, Ohio.
“I think it is obvious what the report intended to do,” he said, adding that his company plans to fulfill all orders for Lordship vehicles. “We are a legitimate service program. We buy vehicles for municipalities and customers who do not have large budgets to switch to EVs. “
RIDE price: Lordstown Motors shares lost 16.54% on Friday, closing at $ 14.78.
Steve Burns, CEO of Lordstown Motors, at an event at the White House in September 2020 with former President Donald Trump and the Endurance electric truck. Photo courtesy of the Trump White House Archives.
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