NEW YORK: Shares of Lordstown Motors dove Monday as it announced its top executive had resigned after an investigation concluded some of the company’s statements about auto pre-orders were inaccurate.
After warning last week that it lacked sufficient capital to begin commercial production, the electric truck startup said Chief Executive Steve Burns and Chief Financial Officer Julio Rodriguez had both resigned.
Lordstown is searching for a permanent CEO after going public last fall through a merger, benefiting from a wave of buying interest in electric autos.
However, the Ohio-based company has been under scrutiny following a March report by short sellers at Hindenburg Research, which called its investment thesis a “mirage” built on “fake orders,” and pointed to various production problems.
Lordstown’s board set up a special committee to investigate Hindenburg’s allegations. The board panel enlisted the law firm Sullivan & Cromwell to probe the charges.
The investigation concluded that Hindenburg’s analysis was “in significant respects, false and misleading.” However, the report also said that Lordstown “made periodic disclosures regarding pre-orders which were, in certain respects, inaccurate.”
For example, one entity responsible for many pre-orders appeared to lack the resources to complete the purchases, while other entities that committed “appear too vague or infirm to be appropriately included in the total number of pre-orders,” Lordstown said in a press release.
The company appointed lead independent director Angela Strand as executive chairwoman and Becky Roof as interim chief financial officer. Strand will oversee the transition until a permanent CEO is identified, the company said.
Lordstown’s flagship vehicle is the Endurance pickup truck, which faces tough competition after Ford recently unveiled the first all-electric version of its best-selling F-150 truck.
Chairman David Hamamoto said Lordstown has “achieved significant milestones” on the Endurance and expects “limited production” to begin in late September.
“We have to put in place a seasoned management team with deep experience leading and operating publicly-leased (auto manufacturing) companies,” said Hamamoto in a press release.
“We have complete confidence in Angela and Becky, and our expanded leadership team, to effectively guide the company during this interim period.”
Morgan Stanley welcomed the shakeup, saying, “We felt it was untenable for the company to secure necessary new capital with a management team widely seen as potentially not leading the company into the next era of its development.”
However, Morgan Stanley also expressed doubts about the Endurance’s motor system, which is installed in the vehicle’s wheels.
Shares finished down 18.8% at $9.26.