Hindenburg Research Targets Lordstown Motors with Short Seller Report

Hindenburg Research, known for a previous report concerning Nikola Motor that triggered an SEC investigation and the departure of its founder, has now set its sights on Lordstown Motors. This Ohio-based electric vehicle manufacturer became publicly listed following a merger with DiamondPeak Holdings Corp., currently holding a market capitalization of $1.6 billion.

Short Position and Stock Impact

On Friday, Hindenburg Research announced it had established a short position in Lordstown Motors. This action resulted in a 21% decline in the company’s share price. While some recovery has occurred, shares remain approximately 15% lower than the previous day’s trading value.

The firm’s short position stems from concerns that Lordstown Motors, a company with “no revenue and no sellable product,” has potentially misled investors regarding both demand and production capabilities.

Questionable Pre-Order Numbers

Hindenburg’s report challenges Lordstown Motors’ claim of securing 100,000 pre-orders for its electric pickup truck, a figure publicized in January. The research suggests these orders are largely unsubstantiated.

The short seller alleges that the pre-orders were utilized as a means to attract capital and establish a perception of legitimacy, rather than reflecting genuine customer interest.

Allegations Against Steve Burns

Further allegations indicate that Lordstown founder and CEO, Steve Burns, compensated consultants for each truck pre-order as early as 2016, during his tenure at Workhorse.

Evidence presented includes photographs and a 911 call detailing an incident in January where a Lordstown prototype vehicle caught fire during a test drive.

Company Response and Counterclaims

A Lordstown Motors spokesperson stated that a comprehensive response to the Hindenburg report is forthcoming, promising a full refutation of its claims.

Steve Burns, in comments to the Wall Street Journal, dismissed the report as containing “half-truths and lies,” characterizing it as a deliberate attempt to negatively impact the stock price prior to the company’s first quarterly earnings report as a public entity.

Lordstown Motors: Background and History

Origins and Relationship with Workhorse

Lordstown Motors has a relatively brief history, originating as an offshoot of Burns’ other venture, Workhorse Group. Workhorse, a publicly traded battery-electric transportation technology company, currently holds a 10% stake in Lordstown Motors.

Workhorse itself has faced financial challenges since its founding in 1998. A recent setback involved losing a bid to supply electric vehicles to the U.S. Postal Service, causing a near 15% drop in its share price.

Currently, Workhorse shares are trading around $16.58, representing a 60% decrease from their peak of $42.96 on February 4.

Factory Acquisition and Production Plans

In 2019, Lordstown Motors acquired a 6.2 million-square-foot manufacturing facility from General Motors (GM).

The company intends to produce 20,000 electric commercial trucks annually, beginning in 2021, at the former GM Assembly Plant located in Lordstown, Ohio.

Launch Event and Political Context

The Lordstown Endurance electric pickup was unveiled in June 2020 during a high-profile event with significant political overtones.

The event initially lacked detailed information regarding the truck’s interior, performance, or battery specifications. The focus subsequently shifted to a 25-minute speech delivered by former Vice President Mike Pence, emphasizing former President Trump’s policies related to jobs, manufacturing, China, and the COVID-19 response.

Pre-Order Claims and Customer Intent

During the launch event, Burns announced the receipt of 20,000 pre-orders, suggesting full production capacity for the first year.

Lordstown Motors identified potential customers who had submitted letters of intent, including AutoFlexFleet, Clean Fuels Ohio, Duke Energy, and others.

Burns subsequently increased the pre-order figure to 100,000, a claim now disputed by Hindenburg Research.

Confirmation of Paid Pre-Orders

From the Hindenburg report, Burns confirmed to the Wall Street Journal that Lordstown compensated consultants for generating pre-orders understood to be non-binding.

He justified this practice as a means to “assess market demand,” while denying any misrepresentation of the company’s pre-order book.

Event Announcement

• Early Stage is a premier event for startup entrepreneurs and investors.
• Attendees will learn from successful founders and VCs about building businesses, fundraising, and portfolio management.
• Sessions cover fundraising, recruiting, sales, product market fit, PR, marketing, and brand building.
• Audience participation is included with time for questions and discussion.
• Use code “TCARTICLE” at checkout for a 20 percent discount.