DOJ Investigates Lordstown Motors - Electric Vehicle Startup

Lordstown Motors Faces Increased Scrutiny

Lordstown Motors is experiencing continued difficulties. The electric vehicle startup is currently under investigation by the Department of Justice, alongside a pre-existing inquiry conducted by the Securities and Exchange Commission.

Department of Justice Investigation

According to sources who wish to remain anonymous, the investigation initiated by the Department of Justice is in its preliminary phases. The U.S. attorney’s office located in Manhattan is leading the proceedings.

A representative for Lordstown Motors communicated to TechCrunch that the company is fully dedicated to cooperating with all governmental and regulatory investigations. They expressed a desire to resolve these matters, allowing the new leadership team to concentrate on the production of the Lordstown Endurance, their full-size all-electric pickup truck.

Recent Challenges for Lordstown

This investigation represents the newest challenge in a series of setbacks for the company. Recently, Lordstown announced a reduction in planned production numbers for the Endurance, halving the initial estimate from approximately 2,200 vehicles to 1,000.

Shortly after this announcement, a significant leadership change occurred, with the resignation of both founding CEO Steve Burns and CFO Julio Rodriguez. Burns initially founded the company as a spin-off from his prior venture, Workhorse Group.

Early Successes and Subsequent Concerns

Lordstown initially demonstrated strong potential, securing investments from General Motors. This investment facilitated the purchase of a 6.2-million-square-foot manufacturing facility from the automaker in late 2019.

The company garnered positive attention in August of the previous year when it announced plans to become a publicly traded entity through a merger with a special purpose acquisition company (SPAC). This transaction provided approximately $675 million in gross proceeds and increased the company’s market valuation to $1.6 billion.

However, less than a year later, Lordstown notified the SEC that it lacked the necessary capital to commence manufacturing of the Endurance.

Allegations of Misleading Pre-Order Numbers

In March, Hindenburg Research, a short-selling firm, published a report challenging the company’s claims regarding 100,000 pre-orders for the electric pickup. The report asserted that “extensive research reveals that the company’s orders appear largely fictitious and used as a prop to raise capital and confer legitimacy.” This led to the opening of the SEC investigation.

Current Status of the Inquiry

The Wall Street Journal’s report does not specify the extent of the Department of Justice’s inquiry, and Lordstown declined to offer further details. TechCrunch will provide updates as more information becomes available.

Here's a summary of the key issues: