The Electric Truck startup Lordstown Motors Corp. disclosed in a new regulatory filing Tuesday that it doesn't have sufficient cash to start commercial production and has doubts about whether it can continue as a going concern until the end of the year.
The company has amended its annual report to include the non-sponsorship notice, which can alert companies to survival problems within the next 12 months. The warning comes as new challenges emerge for the two-year old company that is trying to convert a former General Motors Co. manufacturing unit in Ohio to produce electric pickup trucks. It has announced that its first model, Endurance, will start production in September.
Lordstown Motors Chief Executive Steve Burns said on a call with analyst in late May that the startup would need more capital to reach its target of building 2,200 pickup trucks by year-end. The company said at the time that higher-than expected costs were accelerating its cash burn and that it would finish the year with between $50 million and $75 million on hand.
The company was one among a number of new electric vehicle startups that went public last year through special mergers with reverse acquisition companies or SPACs. Lordstown Motors raised $675 million from its aspiring merger last fall, a deal that valued the reverse truck maker at $1.6 billion.
The company didn't immediately respond to comment requests.
Lordstown Motors announced in its filing Tuesday that it had conducted an analysis preparing its 2020 financial statements and concluded there were substantial doubts about the company's ability to continue as a limited company in 2021. The independent auditors shared the doubts, Lordstown Motors said in the filing.
Lordstown Motors also said in a filing that it found material weaknesses in its internal controls over financial reporting that could have led to material misstatements in its financial statements.
Shares in Lordstown Motors fell sharply on the news of afternoon and were at $11.22 on the day for 16%. The stock had traded before the session as high as $15.80.
Lordstown Motors takes its name from the closed town where the company acquired the small GM assembly plant for $20 million in 2019. According to a regulatory filing, GM later forgave the purchase obligation, other borrowings and interest in exchange for 7.5 million shares of Lordstown Motors or a 4.5% stake. The sale provoked the hope that the company could keep manufacturing jobs in the Ohio region.
Lordstown Motors plans to build an electric pickup truck called the Endurance and sell it to commercial fleet operators for whom electric vehicles can offer lower operating costs relative to gas-powered ones.
Lordstown Motors was targeted by shorter seller Hindenburg Research earlier this year, which alleged the company had misrepresented the strength of its truck pre-orders and its progress towards launching the Endurance later this year. Mr. Burns said shortly after the publication of the report that it contained half-truths and lies in an interview with The Wall Street Journal.
The SPAC subsidiary later opened an inquiry related to the merger and the pre-orders of the company's vehicles. Lordstown Motors disclosed two subpoenas received and said it was cooperating with the SEC inquiry.
The electric-vehicle space was a red hot market last summer, with investors plowing money into upstarts that had yet to produce a single car. The company s 2020 stock surge caused the fervor and a rush on Wall Street to find the next challenger brand.
A broader boom in SPAC mergers further fueled the rise of electric-vehicle companies and issuing new businesses a way to get capital and go public outside the traditional initial-public offering process.
About 30 companies specializing in electric vehicles manufacturing, as well as related technology such as batteries and charging infrastructure, have signed mergers since March 2020 to go public through SPAC acquisitions and raise more than $21 billion from investors, according to data from BMW AG, partner Baris Guzel, a venture capital firm funded by BMW AG.
The established startups face increased competition from established auto makers. Last month, Ford Motor Co. Unveiled an electric version of its bestselling F-150 pickup truck with a starting price for a fleet-oriented version that undercuts the Endurance by more than $10,000 before taxes incentives.
Lordstown Motors became a political focal point during the 2020 presidential election, when President Trump praised the company as representing hope for manufacturing jobs in Ohio, a pivotal state politically.
In September, Mr. Trump toured the White House with a prototype Endurance truck and chatted to Mr Burns before television cameras during which the president lauded the company's technology.