Lordstown Motors Rebuts Accusations of Fraudulent Market Tactics
Electric truck startup Lordstown Motors Corporation RIDE 16.54%has aggressively challenged a report from Hindenburg Research that reports the firm of fraudulently marketing itself.
What Happened: Hindenburg’s reports”The Lordstown Motors ‘Mirage’: Fake Orders, Undisclosed Production Hurdles, And A Prototype Inferno,” details an investigation into how the company advertises itself and specifically its Endurance electric-powered truck. “Lordstown is an EV SPAC with no revenue and no sellable product, which we believe has grossly misled investors on both its demand and production capabilities,”
Hindenburg continues, claiming that the firm “pointed to its book of 100,000 pre-orders as proof of demand for its proposed EV truck. Our extensive research reveals that the company’s orders appear largely fictitious and used as a prop to raise capital and confer legitimacy.”
The Hindenburg report also mentions that Lordstown paid consultants to create pre-orders ahead of its initial public offering this past October, adding that former Lordstown workers described the company founder and CEO Steve Burns as a “con man” or a “PT Barnum” figure.
In an interview with the Wall Street Journal, Burns admits to hiring consultants to generate pre-orders but states this was done to assess market demand. He assured the publication the preorder book was never misrepresented.
“We are not stating these are orders and have never stated that,” he said.
The Journal also points out that Lordstown Motors stated that it did not have customers or pending orders in its last December regulatory filing, highlighting there was no assurance the nonbinding pre-orders would become sales.
In a January news report, Lordstown Motors said the more than 100,000 reservations it fielded for its Endurance truck were nonbinding. Burns told the Journal that some of the companies that placed pre-orders were not fleet operators, but their middlemen. “If a guy signed a piece of paper that said ‘I think I can move x-thousand of them,’ we believe them,” he said. “But it’s not in blood. It’s a nonbinding letter of intent.”