Investigation of Lordstown Motors Corp.
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Lordstown Motor Corporation (RIDE) Misled Investors About its Endurance Orders and Production Capabilities
On August 1, 2020, Lordstown announced it had entered into a merger agreement with DiamondPeak Holdings Corp, a special purpose acquisition company, through which Lordstown would become a publicly traded company. In announcing the merger, Lordstown stated that demand for Endurance – a full-size electric pickup truck and the Company’s first production vehicle – was “proven with pre-orders covering first year of production.” In announcing that it had become publicly traded, on October 26, 2020, Lordstown re-affirmed it had received 40,000 pre-orders and confirmed “assets were already in place in order to successfully achieve [its] production milestones.” Throughout the class period, the Company continued to tout its ability to begin production of the Endurance in September 2021, and announced a consistent increase in pre-orders.
On March 12, 2021, Hindenburg Research revealed that the Company had “no revenue and no sellable product” and “misled investors on both demand and production capabilities.” The reported cited “fake pre-orders” that were “used as a prop to raise capital and confer legitimacy.” The report further detailed why the Endurance was three to four years away from production. On this news, Lordstown’s stock price fell $2.93 per share on March 12, to close at $14.78, a decline of approximately 17%. Then, on March 17, 2021, Lordstown announced its financial results for fourth quarter of 2020, reporting a net loss of $101 million. The Company also announced that the SEC had launched an investigation regarding matters described in the Hindenburg Report and that it had formed a special committee to conduct an internal inquiry. On this news, Lordstown stock price fell another $2.08 per share, to $13.01 on March 18, 2021, representing a 58% decline from the class period high.