Lordstown Motors’ rough road continues; CEO and CFO are out

Jun 14, 2021, 7:07 AM | Updated: Jun 15, 2021, 3:02 am

The top two executives at Lordstown Motors have resigned as problems at the Ohio electric truck startup mount.

CEO Steve Burns and Chief Financial Officer Julio Rodriguez stepped down, the company said Monday, sending shares already down 40% this year tumbling more than 17%.

The departures were announced on the same day that Lordstown responded to a scathing March report from the short-selling firm Hindenburg Research which questioned the number of preorders the company claimed to have received for its marquee Endurance vehicle.

Lordstown said that while its independent investigation found that the vast majority of the Hindenburg report was unsubstantiated, it acknowledged that one potential buyer that made a large number of preorders doesn’t appear to have adequate resources to make those purchases. Other preorders appear too vague or weak to be relied on, the company said Monday.

The report spawned four potential class-action lawsuits against Lordstown by investors who claim they were defrauded.

The resignations at Lordstown come less than a year after the founder of another electric vehicle startup, Nikola, resigned amid allegations of fraud. The resignation of Nikola’s Trevor Milton also came on the heels of an investigation by Hindenburg, which said Nikola’s success was “an intricate fraud” and based on “an ocean of lies” including a video showing a truck rolling downhill to give the impression it was cruising on a highway, and stenciling the words “hydrogen electric” on the side of a vehicle that was actually powered by natural gas.

Last week, Lordstown cautioned that it may not be in business a year from now as it struggles to secure funding to begin full production. In a quarterly regulatory filing, the company said that the $587 million it had on hand as of March 31 isn’t enough to begin commercial production of its full-sized electric pickup, called the Endurance, at a former General Motors plant in Ohio near Youngstown.

Yet Lordstown ran into trouble not long after it became a publicly traded company last year through a merger with a special-purpose acquisition company. Going public through a so-called SPAC is typically quicker than traditional initial public offerings that are usually handled by major financial institutions.

In January an Endurance pickup truck prototype caught fire 10 minutes into its initial test drive in Michigan. Then the company failed to pay $570,000 in real estate taxes due in early March.

Company shares have been on a sharp, downward trajectory since February and the stock fell below the initial public offering price of around $10 on Monday.

That could get worse.

Burns, the departing CEO, is the company’s largest shareholder with a 26.25% stake, according to FactSet.

Investors that still remain may not want to stick around to find out what happens if and when Burns begins to unload his shares, according to Adam Jonas of Morgan Stanley.

That dynamic is playing out as Lordstown’s operations are coming under increasing scrutiny, which it was partially shielded from when it went public through a SPAC.

SPACs can cut up to 75% off the time it takes for a company to get its stock trading on an exchange, versus the traditional process of an initial public offering. SPACs can also make it easier to get prospective buyers on board. Companies going the SPAC route often feel more license to highlight projections for big growth they’re expecting in the future, for example. In a traditional IPO, the company is limited to highlighting its past performance, which may not be a great selling point for young startups that typically fail to put up big profits or revenue.

Investors in Lordstown include General Motors, which took a 5% stake. Spokesman Jim Cain said Monday that the company’s investment is unchanged. GM last year appeared close to taking a substantial stake in Nikola, but distanced itself from the company after its founder stepped down.

Lordstown named lead independent director Angela Strand as executive chairwoman Monday and said that she will oversee the organization’s transition until a permanent CEO is found. Strand is the managing director of advisory firm Strand Strategy.

Becky Roof, who has been an interim chief financial officer at Eastman Kodak, Hudson’s Bay and Saks Fifth Avenue, was named interim CFO at Lordstown.

The company has hired an executive search firm to seek out a new CEO and chief financial officer.

____

AP Business Writer Stan Choe in New York, and AP Auto Writer Tom Krisher in Detroit, contributed to this story.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

A strike sign is displayed by an entrance at Waterloo train station, in London, during a railway wo...
Associated Press

Here we go again: Strike snarls UK trains for a third day

LONDON (AP) — Train stations were all but deserted across Britain on Saturday, as the third day of a national strike snarled the weekend plans of millions. Train companies said only a fifth of passenger services would run, as about 40,000 cleaners, signalers, maintenance workers and station staff walked off the job in Britain’s biggest […]
3 hours ago
Local resident Tetyana points at her house heavily damaged by the Russian shelling in Bakhmut, Done...
Associated Press

Russia pushes to block 2nd city in eastern Ukraine

KYIV, Ukraine (AP) — Russian forces are trying to block a city in eastern Ukraine, the region’s governor said Saturday, after their relentless assault on a nearby city forced Ukrainian troops to begin withdrawal after weeks of intense fighting. Russia also launched missile attacks on areas far from the heart of the eastern battles. Serhiy […]
3 hours ago
Bangladesh's longest bridge, which took eight years to build amid setbacks involving political conf...
Associated Press

Bangladesh marks opening of country’s longest bridge

DHAKA, Bangladesh (AP) — Bangladesh’s Prime Minister Sheikh Hasina on Saturday celebrated the opening of the country’s longest bridge, which took eight years to build amid setbacks involving political conflict and corruption allegations. The 6.51-kilometer (4.04-mile) bridge spanning the Padma River cost an estimated $3.6 billion and was paid for with domestic funds after the […]
3 hours ago
Police prepare their equipment and gather prior to a demonstration ahead of the G7 summit in Munich...
Associated Press

Protests expected as G-7 leaders set to arrive in Germany

MUNICH (AP) — Tens of thousands of protesters are expected to gather in Munich on Saturday as the Group of Seven leading economic powers hold their annual gathering in the Bavarian Alps in Germany, which holds the G-7´s rotating presidency this year. Police were expecting at least 20,000 protesters in the Bavarian city, the German […]
3 hours ago
A model displays the collection by Russian designer Slava Zaitsev during the opening of the Fashion...
Associated Press

AP PHOTOS: Moscow Fashion Week sprawls across the capital

MOSCOW (AP) — Chic and adventurous models and couturiers have been spread all over the Russian capital for Moscow Fashion Week, flaunting their designs in venues ranging from a sprawling Stalin-era propaganda exposition to a large park near the Kremlin admired for its innovative features. More than 100 shows are being held during the week […]
3 hours ago
Hundreds of people were slaughtered in a village and its surroundings this month in the latest expl...
Associated Press

‘Total bloodbath’: Witnesses describe Ethiopia ethnic attack

NAIROBI, Kenya (AP) — The heavily armed men appeared around the small farming village in Ethiopia’s Oromia region, frightening residents already on edge after recent clashes between government troops and rebels. “The militants assured us that they will not touch us. They said they are not after us,” resident Nur Hussein Abdi told The Associated […]
3 hours ago

Sponsored Articles

...
Day & Night Air

Tips to lower your energy bill in the Arizona heat

Does your summer electric bill make you groan? Are you looking for effective ways to reduce your bill?
...
Christina O’Haver

BE FAST to spot a stroke

Every 40 seconds—that’s how often someone has a stroke in the United States. It’s the fifth leading cause of death among Americans, with someone dying of a stroke every 3.5 minutes.
...
Arizona Division of Problem Gambling

Arizona Division of Problem Gambling provides exclusion solution for young sports bettors

Sports betting in Arizona opened a new world to young adults, one where putting down money on games was as easy as sending a text message.
Lordstown Motors’ rough road continues; CEO and CFO are out