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Lordstown Motors Corp. shares tanked more than 20% Monday after the electric-truck maker said its two top executives, including its founder, have resigned.
Lordstown stock
RIDE,
was on track for its lowest close since May 25, when it closed at $8.95. The 21% drop would be the largest one-day percentage decrease on record. The stock was off 71% from its record closing high of $31.40 hit on Sept. 21.
Lordstown said earlier Monday Chief Executive and founder Steve Burns and Chief Financial Officer Julio Rodriguez had resigned, with interim executives appointed. It reiterated its plan to start “limited production” of its electric trucks in late September.
“Management change is an important first step for the company to move
forward,” Morgan Stanley analyst Adam Jonas said in a note Monday. “We felt it was untenable for the company to secure necessary new capital with a management team widely seen as potentially not leading the company into the next era of its development.”
The stock was also under technical selling pressure as departing CEO Burns is the the company’s largest shareholder, with a stake of 26.25% as of June 8.
Lordstown has said it intends to seek new capital amid mounting expenses and in delayed quarterly and annual filings last week had a “going concern” warning about its ability to continue operations without more money.
Separately on Monday, the company had a statement from the board’s special committee tasked with looking into allegations from short-seller Hindenburg Research. Hindenburg in March published a scathing report on Lordstown, calling it a “mirage” and accusing the company of inflating demand and production capabilities.
The committee hired law firm Sullivan & Cromwell to conduct the investigation, which concluded that the Hindenburg report “is, in significant respects, false and misleading.” Its “challenges to the viability of Lordstown Motors’ technology and timeline to start of production are not accurate.”
However, the company’s investigation did detect “issues” about how Lordstown characterized the pre-orders of its Endurance electric truck, saying that they were mostly firm commitments from commercial fleets.
In fact, many pre-orders came from fleet-management companies “or other end users that indicated interest in purchasing Endurance trucks,” as well as “so-called ‘influencers’ or other potential strategic partners that committed to attempt to secure pre-orders from other entities, but did not intend to purchase Endurance trucks directly,” the company’s report said.
At least one undisclosed party with “a large number” of pre-orders “does not appear to have the resources to complete large purchases of trucks. Other entities provided commitments that appear too vague or infirm to be appropriately included in the total number of preorders disclosed,” the company’s report said.
Lordstown Motors went public in October through a reverse merger with a blank-check company.
Its Ohio plant belonged to General Motors Co.
GM,
making compact cars for the legacy auto maker, and was slated to be closed as part of GM’s focus on more popular and profitable trucks and SUVs. It was then sold to Lordstown Motors.
The company in January said it had more than 100,000 orders for the Endurance. It said later that month it was “on track” to begin production of the truck, called the Endurance, this year, with prototypes due “in the coming weeks.”
Lordstown’s stock has lost 54% this year and 9% in the past 12 months. That contrasts with advances of 13% and 39% for the S&P 500 index
SPX,
in the same periods.
