LORDSTOWN — Lordstown Motors Corp. is now facing a class action lawsuit from investors alleging executives delivered misleading statements about the company and committed securities violations.
Attorney Drew Legando of Cleveland law firm Merriman, Legando, Williams and Klang LLC filed the suit Monday in Ohio’s Northern District federal court on behalf of Lordstown Motors shareholder Matthew Rico.
Rico purchased 24 shares of Lordstown Motors (NASDAQ: RIDE) between Feb. 18 and March 5, paying in total about $540, according to a shareholder certification filed alongside the complaint. The stock has lost nearly half its value since Rico’s first purchase, which he made just a week after the stock had reached a nearly five-month peak.
At a 47 percent loss, Rico’s shares lost about $250 in value, more than half of which was lost after the short-seller firm Hindenburg Research published a damaging report on the state of the company and accused executives of misleading investors.
At least two other law firms have launched their own investigations into potential claims on behalf of Lordstown Motors shareholders.
Shares of Lordstown Motors Corp. continued to tumble from Wednesday, following the company’s first earnings call since its public merger, during which executives declined to address Hindenburg’s claims and acknowledged the U.S. Securities and Exchange Commission has gotten involved.
Rico’s lawsuit alleges the company never disclosed the SEC inquiry in its Q4 and 2020 year-end earnings filings.
By market-close Thursday, Lordstown Motors Corp. (NASDAQ: RIDE) had fallen more than 13 percent from Wednesday’s close of $15.09, down to $13.01. The stock had rallied in the hours before the company’s Wednesday call, which was scheduled after market-close, but lost another 9 percent in aftermarket trading following the call.
The stock has continued to slide nearly 27 percent since Friday, when Hindenburg Research — a stock market research firm with a short position in Lordstown Motors Corp. stock — alleged the company’s book of more than 100,000 non-binding pre-orders for its all-electric Endurance pickup truck were “largely fictitious”.
During a November interview with Jim Cramer, host of CNBC’s Mad Money, CEO Steve Burns characterized them as “serious orders.” But they’re actually letters of intent to buy, and signers aren’t actually obligated to purchase the vehicles or place deposits for them.
Burns has said the company used the letters to gauge demand for the vehicle, which is being marketed toward commercial fleet buyers — but Hindenburg on Friday called that demand a “mirage.”
“We’ve always been very clear, right? These are just what they’re intended to be. These are non-binding letters of intent. They’re called pre-orders out in the real world,” Burns said, when asked directly about the orders in an interview Thursday morning on CNBC’s Squawk Box. “I don’t think anyone thought that we had actual orders, right? That’s just not the nature of this business.”
"We never said we had orders. We don't have a product yet so by definition you can't have orders," @LordstownMotors CEO Steve Burns tells @lebeaucarnews. "I don't think anybody thought we had actual orders. That's just not the nature of this business."$RIDE pic.twitter.com/64G9gvBsQS— Squawk Box (@SquawkCNBC) March 18, 2021
Tim Grosse, CEO of the Texas-based E Squared Energy Advisors, which was cited in the Hindenburg report as one of Lordstown Motors’ larger pre-order clients, said non-binding pre-orders are common practice in the electric vehicle sphere. Other startups like Tesla — which is also developing an all-electric truck — and Lucid have done the same, he said. Like Lordstown Motors, they’ve yet to bring their products to market.
Grosse said he feels the market is treating demand for electric vehicles the same as it would for internal combustion vehicles, which isn’t the right way to look at it.
“The only thing about these types of programs is these are all brand new,” Grosse told Mahoning Matters in an interview earlier this week. “There’s nobody that has a fleet under this type of [electric vehicle] model. Whenever anything is new and people don’t understand it, they’re quick to point fingers.”
Lordstown Motors is aiming to be the first to bring an all-electric, light-duty pickup truck to market, Burns has said. He assured investors Wednesday the company is on-track to begin mass production in September.
E Squared’s mobility program acts as an intermediary between fleet operators and suppliers like Lordstown Motors, Grosse said. E Squared’s letter of intent for 14,000 Endurance vehicles suggests the company expects it could sell that many to its fleet customers.
He claims E Squared is working with “some of the largest fleet owners in the country,” but the mobility program itself is only a couple of months old. Electric vehicle adoption by fleet operators is still “uncharted waters,” he said.
The volume of shorted RIDE shares is still higher than it was before Hindenburg’s report, according to Naked Short Report. The site reported nearly 11 million newly shorted shares the day of Hindenburg’s report, now down to 2.6 million on Wednesday — meaning more people are now betting on Lordstown Motors’ stock losing value.
The company’s market cap continues to shrink, down to $2.2 billion by close of business Thursday.