Common Motors-backed EV startup Lordstown Motors has been accused of fabricating a number of the 100,000 preorders for its forthcoming Endurance electrical pickup and deceptive traders, the general public, and authorities regulators about how a lot progress it’s made in growing the truck.
The accusations are available in a new report from short-selling firm Hindenburg Research — the identical agency that revealed a report about hydrogen trucking startup Nikola that led to the founder resigning his place and a significant restructuring of that firm’s enterprise. Hindenburg says within the report, revealed Friday, that it has taken an unspecified brief place in Lordstown Motors, which means it stands to earn cash from the startup’s inventory worth falling.
The accusations from Hindenburg may additionally increase questions on Common Motors and the due diligence it does on the startups it backs. GM, the most important automaker within the US, had beforehand deliberate to take a giant stake in Nikola earlier than Hindenburg’s report got here out final 12 months.
GM has backed Lordstown Motors since its inception and has a seat on the startup’s board. It loaned Lordstown Motors $40 million so the startup may purchase a plant that GM shuttered in Lordstown, Ohio — a deal praised by then-president Donald Trump that finally led to a White Home photo-op and then-Vice President Mike Pence showing on the Endurance unveiling occasion.
GM additionally invested extra money and made different contributions (for a complete worth of $75 million) to Lordstown Motors as a part of its merger with a particular goal acquisition firm, or SPAC, which turned the startup right into a publicly listed firm on the Nasdaq inventory trade and helped it increase almost $700 million complete. (The startup has since mentioned it’s in the “due diligence” phase of obtaining a loan from the Division of Power (DOE), too.)
“The $75 million funding from Common Motors in LMC included sure in type contributions which have already been supplied to Lordstown. These embrace the plant itself. We’ve got nothing to say in regards to the report,” GM’s director of finance and gross sales communications James Cain mentioned in an e-mail. Representatives for Lordstown Motors and the DOE didn’t instantly reply to requests for remark.
Lordstown Motors has claimed to have presold 100,000 pickup vehicles so far. However Hindenburg accuses Lordstown Motors founder and CEO Steve Burns of paying consultants to preorder the startup’s electrical pickup truck — one thing Burns confirmed to The Wall Street Journal on Friday.
The agency claims a number of big-batch orders for the truck have been from corporations that both exist totally on paper or don’t function automobile fleets to start with. One order for 14,000 vehicles — which might price greater than $700 million — was positioned by a Texas firm with simply two staff on LinkedIn. One other order for 1,000 Endurances was from a equally small firm, the CEO of which allegedly advised Hindenburg he had no plans to purchase the vehicles.
Hindenburg additionally consists of claims in its report that some preorders are nonbinding and require no cash upfront, although this can be a apply that has been widespread amongst startups within the house that attempt to guide orders earlier than getting a automobile to manufacturing.
Whereas Burns has caught to a September 2021 date for getting the startup’s pickup into manufacturing, Hindenburg says it spoke to former staff who imagine the truck is a minimum of three years away from being prepared, together with one who allegedly claimed that the startup has not accomplished chilly climate and different testing required by the federal government. The report additionally cites a local news report of one of the startup’s prototype trucks catching fire in February as further evidence.
What’s extra, Hindenburg found a beforehand unreported lawsuit filed in opposition to Lordstown Motors by EV startup Karma Automotive. In it, Karma accuses Lordstown Motors of making an attempt to steal its infotainment system expertise after initially making an attempt to purchase it.
Lordstown Motors’ relationship to Burns’ earlier firm, fellow Ohio EV startup Workhorse, can also be known as into query within the report. Burns based Lordstown Motors shortly after leaving Workhorse in 2019, thought Hindenburg claims he was fired. Workhorse didn’t instantly reply to a request for remark.
Because it entered into the cope with GM to purchase the Lordstown manufacturing unit, Burns’ new startup struck an settlement with Workhorse to license IP for a pickup truck that his former firm was by no means in a position to get off the bottom. Hindenburg claims that Workhorse was more than pleased to unload the pickup truck. This deal has paid off handsomely up to now for Workhorse, too, as Lordstown Motors paid $15.eight million for the IP, plus one other $4.eight million when the brand new startup went public. Lordstown Motors additionally handed Workhorse a 10 % stake that’s now price some $300 million primarily based on the brand new startup’s inventory worth as of the top of 2020.
Hindenburg clearly stands to profit from any hit to Lordstown Motors’ inventory worth. The agency’s analysis into Nikola did result in that startup performing an inner investigation, which turned up evidence that founder Trevor Milton did in fact make “inaccurate” statements about his company earlier than he finally resigned. However Nikola claims the outcomes of the investigation don’t line up with Hindenburg’s accusation that that the startup is an “intricate fraud.” Division of Justice and Securities and Change Fee investigations into Nikola are at present ongoing.
Replace March 12th, 4:00PM ET: Added particulars in regards to the Lordstown manufacturing unit being included within the $75 million funding made by GM.