Short-seller Hindenburg Research targets EV startup Lordstown Motors; Shares fall 16%

The startup is named after the Ohio town where the company bought a dormant former General Motors Co.

assembly plant in 2019. As a result of that deal, GM acquired a small stake in Lordstown Motors. A GM spokesperson immediately declined to comment.

The Wall Street Journal has not been able to independently verify the allegations in Hindenburg’s report.

Shares of the Ohio-based company fell 16% after the report was released on Friday morning. Hindenburg – which last year targeted another electric truck startup, Nikola Corp.

– disclosed in its most recent report that it has a short position in Lordstown Motors, meaning it could benefit from declines in the company’s stock price.

Hindenburg’s report described Lordstown Motors’ order book as a “ mirage ” and said, among other allegations, that it paid an outside advisory group to generate pre-orders for its truck before the deal went public in 2020. the company said it was dealing with former employees and business associates.

Mr. Burns confirmed that the company paid consultants to generate pre-orders that were believed to be non-binding as a way of assessing market demand, but denied misrepresenting its pre-order book.

“We are not saying these are orders and have never stated them,” he said.

Lordstown Motors is one of many clean transport startups that have gone public in the past year due to growing investor interest in electric vehicles. The company noted through a deal with a special acquisition firm, or SPAC, DiamondPeak Holdings Corp. last year, that the company valued the company at $ 1.6 billion.

The company, which had a market value of $ 2.9 billion on Thursday, has yet to sell a vehicle. It focuses on the commercial truck market, vehicles typically used by corporate or government fleet operators.

Lordstown Motors and Mr. Burns have regularly referred to the pre-order book to underline strong demand for the upcoming commercial pickup, the Endurance, and to promote his business to investors. “Most are signed by the CEOs of these big companies,” Burns said of the preorders in a CNBC interview in November. “They are very serious orders.”

In a legal notice in December, Lordstown Motors said it had no current customers or pending orders, and there was no guarantee that the non-binding pre-orders will convert to sales. In a January press release, Lordstown Motors said the more than 100,000 reservations for its Endurance truck were non-binding.

Hindenburg said those orders were not only non-binding, but also “largely fictitious” and did not represent “real question.” The New York-based research firm, led by Nathan Anderson, said it has spoken with several companies and municipalities that have placed preorders, according to the company.

Some pre-orders for 1,000 or more trucks came from companies that didn’t operate commercial fleets, Hindenburg said. Others with pre-orders told the company they did not have the resources or intention to purchase the number of trucks associated with the reservation, the report said.

In response to these claims, Mr. Burns said the company is confident that its trucks are in demand and the pre-orders were a way to gauge interest as it prepares the plant to build for certain volumes. He also said that some of these companies are not fleet managers, but intermediaries.

‘If a man drew a piece of paper that said,’ I think I can move x-thousand, ‘then we believe them. But it is not in blood. It’s a non-binding statement of intent, ”he said.

The report also said that Lordstown Motors was behind schedule for starting production at the Ohio plant in September and faced undisclosed production delays. It said former employees told Hindenburg that the startup was still building battery packs by hand, despite plans to manufacture them in-house.

Mr Burns said Lordstown Motors is still on track to build market-ready trucks in September and that much of the equipment needed to produce the battery packs has been installed.

Hindenburg also said a prototype of Lordstown Motors’ new truck caught fire 10 minutes after its first road test in January. The company quoted a police report it had obtained through requests for public records. Mr. Burns confirmed the fire, but said it was determined to be caused by human error during assembly.

Lordstown Motors initially outlined plans to start production in late 2020. The company later shifted the timing to January 2021, citing the hiatus from the Covid-19 pandemic, and recently delayed the start of production until September.

In January, Lordstown Motors said it had started building 57 prototype trucks for testing. It has also said it is working on an electric van, which will go into production in the second half of 2022.

Lordstown Motors will report its fourth quarter financial results and hold its first investor conference call Wednesday.

Mr. Anderson van Hindenburg and a reporter from The Wall Street Journal are among more than 20 defendants in a lawsuit filed by private equity firm Catalyst Capital Group and Callidus Capital Corp. accusing them of a short-selling conspiracy related to a 2017 article about Catalyst. A Journal representative has said the news organization is confident in the fairness and accuracy of its reporting. Mr. Anderson said, “We are 100% behind our research on the topics.”

Hindenburg released a report on Nikola last fall, accusing the Phoenix-based electric and hydrogen-powered truck manufacturer of “complicated fraud” and making misleading statements. After the report, Nikola’s stock cratered, the company received subpoenas from the Securities and Exchange Commission and the Justice Department, and founder Trevor Milton left the company.

Nikola calls the report’s claims false and misleading. In a recent filing from regulators, it said that an internal review of Hindenburg’s allegations found that nine statements by the company or Mr. Milton were inaccurate, in whole or in part, but that the report disputed the company’s classification as fraud.

Lordstown Motors acquired the plant from GM in November 2019 for $ 20 million, according to a legal filing. GM later canceled the purchase obligation, other loans and interest in exchange for 7.5 million shares of Lordstown Motors, or a 4.5% stake, the filing said.

Write to Ben Foldy at [email protected] and Mike Colias at [email protected]