Time to officially investigate last week's bombshell report.
Ohio-based Lordstown Motors faced a crisis last week and now the Securities and Exchange Commission has informed the electric truck maker an investigation has been opened. To recap, Hindenburg Research, the short seller whose previous expose of another EV truck start-up, Nikola, led to the resignation of the carmaker's CEO and the dissolution of a lucrative deal with General Motors, made serious allegations against Lordstown regarding the overstated 100,000 pre-orders and misleading investors.
The company has since gone into full damage control mode and its CEO, Steve Burns, flatly denied the accusations. Nevertheless, the SEC's inquiry is about to get underway and Lordstown has pledged to fully cooperate.
On an earnings call earlier this week, Burns said the company's board of directors has created a special committee to oversee the situation. But damage has already been done. Shares of Lordstown, which went public a few months ago, are down several percentage points. Hindenburg, which immediately took a short position against Lordstown, meaning it'll earn a profit as the company's shares drop, conducted extensive research before releasing its findings.
Essentially, it uncovered several cases where Burns referred to pre-orders for the Lordstown Endurance truck, a rival to the Rivian R1T and Tesla Cybertruck, as "very serious orders." Instead, they were placed by small and borderline irrelevant companies with non-binding purchasing agreements.
Burns was also accused of paying consultants for every pre-order going back to 2016. The damaging report also placed GM in a potentially embarrassing position. America's largest automaker loaned Lordstown $40 million to help it buy its then-shuttered plant in Lordstown, Ohio, the former home of the Chevy Cruze. GM invested additional funds following Lordstown's IPO totaling $75 million.
Like with Nikola, the new report shows GM did not do its homework beforehand. Despite the unwanted attention, Lordstown says it's still on track to begin production of its first model in September and will unveil its second vehicle, a van, this summer.