Shares of electric vehicle startup Lordstown Motors plunged a whopping 12% during intraday trading Thursday morning after the company confirmed that the U.S. Securities and Exchange Commission had requested information on claims from a short-seller that it was misleading investors.
Last week, Hindenburg Research accused Lordstown in a report of using “bogus” orders to raise capital for its first product, an all-electric pickup truck called the Endurance. The short-seller claimed the pickup was years away from production, but Lordstown insists it is on track to start producing the vehicle in September.
Lordstown CEO Steve Burns declined to comment on the SEC investigation of CNBC on Thursday morning. He told investors on Wednesday during the company’s first earnings call as a publicly traded company that it was “working” with federal officials.
Burns said the company’s acclaimed pre-orders of more than 100,000 pickups – a prime target of the Hindenburg report – were simply intended to gauge customer interest, not confirm future sales. The company also previously categorized the pre-orders as “ non-binding production reservations, ” but Burns also called them “ very serious orders. ”
“We’ve always been very clear, right? These are exactly what they are meant to be. These are non-binding, letters of intent. They are called pre-orders in the real world,” he said Thursday on CNBC’s “Squawk Box.” He later added, “I don’t think anyone thought we had real orders, right? That’s just not the nature of this business.”
Shares of Lordstown are down about 24% since Hindenburg released the report on Friday. The stock fell about 10% during intraday trading Thursday morning. The company’s market capitalization is $ 2.3 billion.
The company also raised its capital and operating costs guidelines for this year on Wednesday, largely citing decisions to accelerate development of its second product (a van) and do more in-house production.
Lordstown went public in October through a special acquisition company, or SPAC. It is one of a growing group of electric vehicle start-ups going public through agreements with SPACs that have become a popular way to raise money on Wall Street because they have a more streamlined regulatory process than traditional IPOs.
Hindenburg’s report on Lordstown comes about six months after it released a damning report on another EV-SPAC start-up Nikola. That report also sparked federal investigations and the resignation of company founder and chairman Trevor Milton.
Short selling is when investors, usually professional hedge fund managers, borrow shares of a stock from a broker and sell them in hopes of buying them back cheaper. If the stock falls, the investors make a profit on the difference when they return the stock to the broker.