On Wednesday, Lordstown Motors Corp. stock fell over 18% as investors awoke to a far different financial picture than the electric truck manufacturer faced in August when it announced it would go public through a reverse merger with a blank-check company.
On Tuesday, Lordstown warned in a U.S. regulatory filing that there was substantial doubt about its ability to continue as the going concern in the next year due to problems in funding production of its vehicle.
Last month, Chief Executive Steve Burns reported on an earnings conference call that the Ohio company needed more capital to launch its Endurance pickup truck and production this year would be half of formerly anticipated expectations.
On Wednesday, Lordstown officials had no immediate comment, but Burns has scheduled an appearance with the Automotive Press Association next Tuesday.
Lordstown's situation has raised doubts about the business's forecasts from 3 August 2020 when it announced its deal to go public through a special-purpose acquisition with the firm DiamondPeak Holdings. The deal closed in October.
Shares of Lordstown were down 18.3% in the early afternoon at $9.17.
Lordstown shares collapsed in March after Hindenburg Research revealed it had taken a short position on the stock, saying the company had misled consumers and investors on demand for its vehicles.
Short sellers bet the price of stock will fall by borrowing and selling shares in hopes of buying them back at a lower price and pocketing the difference.
Lordstown subsequently said the U.S. Securities and Exchange Commission had asked for information related to its merger with SPAC and preorders of its vehicles. Lordstown said Burns cooperated with the investigation.
On Wednesday, SEC officials did not respond to a request for comments about the new order.
The company is also facing class actions stemming from the Hindenburg report.
On Wednesday, the founder Nathan Anderson said in an email that after months of denials and obfuscation, Lordstown is finally beginning to acknowledge its unrealistic financial state and its precarious production projections.
Joseph Spak is an analyst at RBC Capital Markets who initiated coverage on Tuesday of Lordstown with an underperform rating and $5 price target. He thinks Lordstown will need an additional $2.25 billion in capital through 2025 to break even, and will not become solvent until 2025, three years after company projections.
Lordstown blamed COVID 19 and industry-wide related issues for higher spending on parts, shipping and third-party engineering resources when investors warned them last month that it would need more money.
Lordstown said option to raise money could include asset-backed financing and investments from other automakers like other partners. Despite this, Lordstown, the largest shareholder in the company, stated Burns that was not for sale.
Lordstown is also hoping to close a deal with the U.S. Department of Energy for a $200 million loan in order to help pay for the costs of retooling its manufacturing facility. Winning the approval of Energy officials could be key to dissuading some investors' concerns.
Lordstown has been touting the possibility of the loan since August last month and Burns said last month that he hopes to complete this process in the next few months. DOE officials declined to comment on the matter.
When Lordstown announced the SPAC Deal, it boasted that its commercial truck would be first to market to service electric fleet customers. It has affirmed its September launch target line, but the lower production forecast undercuts the head start Lordstown has on Ford Motor Co. who will launch an electric version of its top-selling full-sized pickup, the F-150 Lightning next spring.
At the time of the announcement of SPAC, Lordstown said it had 27,000 preorders for the Endurance worth $1.4 billion and it subsequently raised that total to more than 100,000. After the report on Lordstown, Hindenburg said that the orders were not binding and on Tuesday it said it had no binding purchase orders.
Ford, which is looking to sell the same customers to companies that have said it has 70,000 reservations that require a $100 deposit for its truck.
Lordstown said the Endurance will have a starting price of $52,500 before federal EV tax incentives are implemented. The price for Ford F150 Lightning will start at just under $40,000.
Investors in the early SPAC deal included Fidelity Management Research Co, BlackRock Inc., Federated Hermes Kaufmann Small Cap Fund and Wellington Management Co. BlackRock declined to comment on Wednesday, and officials with the other companies could not immediately be reached to comment.
General Motors Co, which invested $50 million in cash at Lordstown and another $50 million in in-kind contributions including the Ohio plant, declined to comment.