CEO and CFO at Electric Truck Maker Lordstown Resign Amid Financial, Ethical Troubles
Lordstown Motors seemed to be firing on all cylinders. Backed by General Motors, the electric truck builder raised $700 million last year and went public during the SPAC craze.
But how quickly things change. On Monday, Lordstown’s CEO Steve Burns and its CFO Julio Rodriguez resigned, a new report concluded executives lied about pre-order figures, and now there are questions regarding whether the company can even continue as a going concern.
A Truckload of Drama
This saga got rolling in March, when aptly-named short selling firm Hindenburg Research alleged Lordstown was misleading investors with “fake” pre-order numbers. Law firm Sullivan and Cromwell was called in to look under the hood, and that didn’t go so well:
- The majority of the 100,000 non-binding pre-orders Lordstown had claimed it nailed down from commercial fleets were in fact “vague or infirm” commitments with no specific numbers attached, according to Sullivan and Cromwell. One entity that placed a large number of pre-orders doesn’t even have the necessary resources to pay the bill.
- The law firm also confirmed that Lordstown paid a company to put in 1,000 pre-orders, essentially inflating its numbers on purpose.
Big Trouble: Lordstown’s maladies run deep. The company lost $125 million in the first quarter, and said there is “substantial doubt” it can continue in the next year. Its share price was already down 40% in 2021, and dipped another 19% in trading Monday amidst the slew of bad news. To top off the pile of red flags surrounding the truck maker, the SEC is also conducting its own investigation into Hindenburg’s allegations.
Disaster Forecaster: This is the second year in a row that Hindenburg has blown up the career of a CEO at a GM-backed startup. Last June, Trevor Milton resigned as CEO of Nikola after a similar Hindenburg bombshell report. Nikola’s electric truck subsequently proved much more apt at rolling downhill than propelling itself.