The Lordstown Motors disaster was predicted in stock filings

The mayor of Lordstown, Ohio, is waiting to see what happens next with the rollout of high-end electric trucks that have promised to revitalize the village. So do the company’s investors.

Lordstown Motors promised Mahoning Valley 400 jobs and opportunities to turn this part of northeastern Ohio into what some have called “Valley of Effort.”

Instead, the CEOs have Resigned After warning that the company might be running out of money, Lordstown now threatens to become one of the biggest disappointments among electric-vehicle start-ups that have rushed to go public via special purpose buyouts over the past year.

Mahoning Valley knows disappointment. The village of 3,200 people is located about 17 miles from Youngstown, where residents still talk about it. “Black Monday”, today in September 1977 when Youngstown Sheet & Tube Corporation announced the closure of its two largest steel plants and put 5,000 people out of work.

President Donald Trump held a 2017 rally in Youngstown telling Ohioans not to turn away, because “we’re going to get those jobs back, and we’re going to fill those factories.”

The plant where Lordstown Motors said it would make its flagship, endurance pickup, formerly General Motors’ Chevrolet Cruze, employed 12,000 at its height. General Motors shut it down in 2019, and, amid concerns about Trump, agreed to sell it to the startup despite uncertainty about it. financing plans خطط.

“We survived here in the Mahoning Valley,” said Arno Hill, Mayor of Lordstown. “We are the land of false promises.”

The Endurance, Lordstown’s electric pickup, will be geared toward commercial fleet operators © Megan Jelinger / AFP via Getty

Bold Sales Forecast

Lordstown Motors isn’t the first electric car startup that disappointed investors within months of being brought to the public by Spac. Nicola, which plans to make industrial trucks, its founder admitted Totally or partially inaccurate statementsThe company is now under investigation by the US Department of Justice. Shares in other startups slipped as investor euphoria gave way to realism about the difficulties of meeting ambitious production and sales targets.

Companies going public via Spac have more freedom to make bold sales forecasts than companies seeking a traditional initial public offering, a difference that regulators have described as Worry.

Lordstown benefited. PowerPoint presentations used to attract investors in August and September painted a rosy picture of the company’s prospects. It said it expects revenue of $1.7 billion by 2022 and more than triple that by 2024, largely from Endurance, which has a price tag of $52,500 and is aimed at merchant fleet operators rather than luxury-goods buyers.

Significantly, the startup promoted its “robust” balance sheet. It will have $675 million in cash after it goes public, including money raised from institutional investors and cash already owned by DiamondPeak Acquisition, the Spac company set up by former Goldman Sachs real estate banker David Hamamoto. She said she expected “no additional capital requirements” until she started selling cars.

Behind the scenes, he’s been wrangling with organizers over where to put the asterisks in that pink look.

In September, the Securities and Exchange Commission ordered it to state more prominently that an independent auditor, assessing its losses to date, found “material doubt about the company’s ability to continue as a going concern.”

This report, located on page 288 of Lordstown’s preliminary agent statement, was referenced on page 51 of the final version prior to the DiamondPeak shareholder vote.

‘While Lordstown believes the proceeds of business merger [with DiamondPeak] It will provide sufficient funds to alleviate this uncertainty, and additional funding may be required in the future for a variety of reasons,” the company said in the final power of attorney.

September 17, 2020: Lordstown Investors Show عرض

September 21, 2020: Lordstown Exchange with the Securities and Exchange Commission

“Evaluation of Funding Alternatives”

The agent’s fine print proved to be a more reliable guide than some of the numbers found in Lordstown PowerPoints.

The possibility of disappointment was first raised in March when Hindenburg Research was short كانت Publish a report He says the company’s 100,000 pre-orders were “largely fictitious and used as support for a capital increase”. The Securities and Exchange Commission has opened an investigation.

In May, the company hinted that it was planning a capital increase and by last week, Lordstown was warning the company can fail within a year.

According to a regulatory filing dated June 8, $587 million in cash and cash equivalents at the end of the first quarter was “insufficient to fund commercial-scale production.” “Management is currently evaluating various funding alternatives.”

Line graph of the stock price ($) showing Ride with Lordstown Motors

The company did not respond to messages seeking comment for this article, but it did provide a series of public comments this week.

On Monday, when CEO Steve Burns and his chief financial officer resigned, a special committee set up by the Lordstown Council revealed that the company had inaccurately described pre-orders for the electric pickup truck. She added that a large number of “influential people” came and had no intention of buying trucks or from entities that did not have the funds to complete the purchase.

On Tuesday, executives told reporters that the company has enough cash to run through May 2022, and still plans to start limited production of Endurance in September. Company president Rich Schmidt said Lordstown had “binding” purchase orders for the first two years of production.

On Thursday, the company clarified in the SEC filing that while these pre-orders “provide us an important indicator of demand,” they have not been consistent.

High tide does not lift all boats

Mayor Arno Hill says the village has excluded Lordstown Motors from its budget plans. “You don’t limit your money to something you don’t have yet,” he said.

His hopes for an electric future for the Mahoning Valley hang even higher on established players like GM and LG Chem, which announced a joint venture in May 2020 that would build a $2.3 billion plant in Lordstown to manufacture battery cells. Hill said the plant was up and running “at breakneck speed,” and had already begun hiring. It is expected to employ 1,100.

Arno Hill, Lordstown Mayor: ‘We are the land of false promise’ © AFP via Getty Images

The jobs lost when GM shut down the Cruze plant cannot be replaced immediately, Hill said, “but we’re working on it.”

Lordstown’s woes could put investors on hold for Tesla’s next car, who invested money in electric car startups last year.

“It’s a fourth industrial revolution happening, but the rising tide isn’t lifting all boats,” Wedbush analyst Dan Ives said. With Lordstown Motors, “there are more questions than answers at this point.”

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