(Bloomberg) — Lordstown Motors Corp. plunged the most in five months after the short seller whose attack on Nikola Corp. led to its founder’s departure turned its sights on the electric-truck startup.
Lordstown is a company “with no revenue and no sellable product, which we believe has misled investors on both its demand and production capabilities,” Hindenburg Research said. The firm holds a short position in Lordstown, so it stands to gain from a drop in the shares.
While the truckmaker’s chief executive denied the allegations, the short-seller’s missive set the stage for Lordstown having to use its March 17 earnings report, its first as a public company, to defend itself.
The shares tumbled 17% to $14.65 at 1:32 p.m. in New York after dropping as much as 23%, the most intraday since Sept. 24. Lordstown had advanced 77% in the 12 months through Thursday while the Nasdaq Composite Index climbed 68%.
Lordstown is one of a slew of electric-vehicle startups that have gone public through mergers with special purpose acquisition companies. A number have come under close scrutiny, including Velodyne Lidar Inc., whose founder left amid a fight with its board.
Lordstown, according to Hindenburg, “has consistently pointed to its book of 100,000 preorders as proof of deep demand for its proposed EV truck. Our conversations with former employees, business partners and an extensive document review show that the company’s orders are largely fictitious.”
Chief Executive Officer Steve Burns denied the allegations.
“We have always been really clear, verbally and every time that we talk about preorders, that these are nonbinding,” he said in an interview.
Hindenburg said that a $735 million order touted by Lordstown was made by E Squared Energy, a Texas company that doesn’t yet operate a fleet.
Nonbinding Orders
The report also said that Lordstown, which bought a small-car plant closed in 2019 by General Motors Co., has used a consulting firm to help generate preorders for its electric pickups but that since the sales are nonbinding, claims of future revenue will be difficult to convert to real cash flow.
Burns acknowledged that Lordstown hired consulting firm Climb2Glory and said it wasn’t done to create a false impression of sales, but to determine how many customers it could realistically get for its truck. Lordstown also hired the EY consulting firm to study potential sales volume, he said.
“Demand will not be our problem,” Burns said. “We will have more demand than we can possibly build.”
Hindenburg said Lordstown has no truck ready to sell and that a former employee of the company said delays will put production at least three years away.
“We are on track for betas this month and start of production in September,” Burns said in a text message. “Any statement to the contrary is a lie.”
Airship Disaster
“Hindenburgs blow up,” he continued, a reference to the 1937 airship disaster in New Jersey.
The short-seller’s report on Nikola had led to a plunge in its shares, the departure of its founder and inquiries by U.S. authorities. Nikola has said it is cooperating with the inquiries and that an internal review concluded that it had made several inaccurate statements.
Hindenburg said former Lordstown employees called Burns a “con man” and compared him to PT Barnum. The report said some Lordstown executives and directors have sold stock.
Burns said he has never sold a share and that he is all in on Lordstown.
“We’re a startup. It’s easy to take pot shots, especially when you’re short in a stock,” Burns said. “We’re making the first electric pickup. You’re going to get haters.”
Fellow electric-vehicle startup Workhorse Group Inc., whose shares have plummeted after it lost a bid for postal trucks, owns a 10% stake in Lordstown Motors. Burns is Workhorse’s founder and former CEO.
(Updates CEO’s response in eighth paragraph)
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