Lordstown Motors short-circuiting
Company running out of funds, gets 2 subpoenas from SEC
LORDSTOWN — Lordstown Motors Corp. doesn’t have enough money to start commercial production of its battery-powered pickup truck, the Endurance, and has expressed substantial doubt regarding its ability to continue as a going concern over the next year.
The company also received two subpoenas from the U.S. Securities and Exchange Commission for information related to its October merger with special purpose acquisition company DiamondPeak Holdings Corp.
Lordstown Motors’ stock tumbled 16.2 percent to close at $11.22 per share after the company released the details in its amended 2020 financial report Tuesday. Shares, traded under the RIDE ticker on the Nasdaq exchange, continued to fall in after-hours trading.
At the end of 2020, Lordstown Motors had cash and cash equivalents of about $629.8 million, not enough to “fund commercial scale production and the launch of sale” of the company’s electric vehicles, the filing states.
Also for 2020, the company had accumulated a deficit of $134.4 million and reported a net loss of $124.1 million.
All of the financial conditions “raise substantial doubt regarding our ability to continue as a going concern” over the next year, according to the filing.
In common parlance, “going concern” is the company’s ability to stay in business.
Last month during its first-quarter financials call, CEO and founder Steve Burns said the company would cut in half its 2021 production estimate to about 1,000 units without additional capital.
Then, Burns cited higher-than-anticipated spending to complete a beta program, conduct vehicle validation tests, secure production parts and equipment and the need to use third-party engineering resources as reasons for increased research and development expenses and capital expenditures.
The company repeated the statement in Tuesday’s filing.
To alleviate the financial pressure, the company is evaluating various funding alternatives and might seek to raise additional funds through equity financing, debt securities and working with strategic partners.
Another part of the funding solution could include a loan from a U.S. Department of Energy program that helps the automotive sector develop more efficient vehicles. The request, according to the company’s 2020 year-end report in March from the Advanced Technology Vehicle Manufacturing program, would be for at least $250 million.
The company is targeting September to launch preproduction of the truck.
The company also finds itself complying with a probe by the SEC, which on Feb. 17 requested from Lordstown Motors documents related to the merger and information related to “Legacy Lordstown and preorders of vehicles,” according to the filing.
Lordstown Motors, however, didn’t disclose publicly the regulatory inquiry until March 17 on its first-ever earnings call.
The latest SEC filing states the company is responding to the SEC’s requests and is cooperating with the inquiry. It is the first time the company has said the regulatory agency has issued subpoenas. Before, the company had said the SEC had asked for the information.
The company finds itself defending against seven lawsuits filed after a scathing short-sellers report in mid-March characterized Lordstown Motors as a mirage with no sellable product.
The report claims the company misled investors regarding its production capability and preorders, that the more than 100,000 it touted for the truck are “largely fictitious” and “used as a prop” to raise operating capital and confer legitimacy.
Burns said in May a special committee of the board of directors formed to address the short-sellers report is expected to report on the results of the review by the end of the second quarter.
The company, however, has met front and side impact Federal Motor Safety standards in actual crash testing for the Endurance. Burns in May said the tests “are the two most difficult tests for any vehicle.”
“These are critical milestones for us and remove some of the biggest technical barriers. This provides us a solid foundation as we complete our development and validation work,” he said then.
The test shows how well a passenger vehicle would protect occupants in a serious frontal crash.
Later this month, Lordstown Motors will host a weeklong event for investors, auto analysts, customers and partners to tour its factory, the former General Motors assembly plant, test drive the Endurance and engage company executives.
For those unable to attend in person, the company is planning a virtual recreation of the week with a live question-and-answer session with company officials. It will be available on the company’s website 2:30 p.m. June 25.