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Enlarge / This is a demo of Lordstown Motors Endurance, which may never be built.
Lordstown Motors
Electric car startup Lordstown Motors said on Tuesday it didn’t have enough money to start commercial production and was in danger of failing as a company, sending its shares tumbling.
The company on Tuesday amended its annual report with the Securities and Exchange Commission to say within one year it may no longer operate as a “going concern.”
The company said that with current cash and cash equivalents of $587 million through the end of the first quarter, it did not have sufficient funding to launch Endurance, an electric pickup truck geared toward commercial operators.
“These circumstances cast significant doubt about our ability to continue as a going concern,” the company said in the filing.
Lordstown said it was trying to find more funding, but it could not guarantee its success. Its shares fell 16 percent to close at $11.22 and continued to decline in post-closing trading.
The company has fallen behind since it was accused earlier this year by a short seller of inflating orders, which the company denies.
Lordstown Motors first attracted attention in 2019 when it took over a former General Motors plant and promised to hire 400 workers to build electric cars there. President Donald Trump has criticized General Motors after it closed the plant in Ohio, a politically important Midwest state.
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GM loaned Lordstown Motors $40 million to purchase and also invested $75 million in the company.
The plant insurance offer initially came from the Workhorse Group, which was run by Steve Burns, now the chief executive officer of Lordstown. Workhorse’s auditor raised questions in 2018 about whether it could continue to operate as a going concern. The Workhorse Group, another electric vehicle startup, licenses the technology to Lordstown and owns 10% of it.
Short seller Hindenburg Research published a report in March accusing Lordstown of inflating the order book, which led to a Securities and Exchange Commission investigation. Lordstown denied that he overestimated his pre-orders.
But in May, Ohio company executives said they would cut stamina production and look for additional capital, sending its shares tumbling.
The company revealed more details on Tuesday about the regulatory investigation, saying it had received two subpoenas from the Securities and Exchange Commission. One is related to pre-orders and the other to the August 2020 merger with DiamondPeak Holdings, a special purpose acquisition company.
Lordstown also said in Tuesday’s filing that it had found “material weaknesses” in its operations to disclose information to investors. It said it did not have enough people with “appropriate technical accounting skills” to oversee financial reporting or an effective process for assessing risks of material misstatement.
The filing said the company is hiring additional staff to address the issue, but that “there is no guarantee that we will be successful in addressing the material weaknesses.”
At the end of the first quarter, the company reported a accumulated deficit of $260 million and a quarterly net loss of $125 million.
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