Swerve

Lordstown, unjuiced: the buzzy e-truck startup runs into a truckload of trouble

Tuesday, June 15, 2021 by Robinhood Snacks | Disclosures
_Hindenburg checking the e-truck receipts [PeopleImages/E+ via GettyImages]_

Hindenburg checking the e-truck receipts [PeopleImages/E+ via GettyImages]

Hold the hard seltzers... Summer isn't starting off well for Lordstown Motors. The e-truck startup went public via SPAC merger in October, and has been teasing its much-hyped "Endurance" electric pickup since last June. Those were better days for Lordstown.

  • Last week: Lordstown said it doesn’t have enough cash to start commercial production (it hasn't sold a truck yet), and warned it has “substantial doubt” about its ability to survive the next year.
  • Yesterday: Lordstown's CEO and CFO resigned (not encouraging), and the stock plunged 19%.

The "I told you so" award goes to... Hindenburg Research. It's the same short-selling firm that dropped a 67-page report accusing Nikola of exaggerating the readiness of its e-truck tech, calling it "an intricate fraud" (see: truck-rolling-down-a-hill commercial). Nikola's CEO resigned soon after, and the stock has fallen 40% since.

  • In March, Hindenburg released a report alleging Lordstown misled investors by exaggerating its production readiness and biz potential.
  • In January, Lordstown said the Endurance pickup already had 100K nonbinding preorders. Hindenburg did some digging and concluded those were “largely fictitious.” For example: Hindenburg found that companies without commercial fleets had preordered 1K trucks.
  • The TLDR: Hindenburg believes Lordstown used “fake” orders to raise cash, and said its pickup was years away from production. Lordstown still says that it could start production by September.
THE TAKEAWAY

Short sellers can operate like investigative journalists… but with major conflicts of interest. A new report partially confirms Hindenburgs findings about the preorders. Now the SEC is investigating the allegations. Short sellers can sometimes have a corrective effect on markets by exposing overvalued companies, as Hindenburg may have done. Buuuut: Hindenburg also has a short position in the stock — aka: it would profit from Lordstown falling. Short sellers can make companies more transparent – but they're driven by their own financial incentives.