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UPDATE | Is Lordstown Motors a 'mirage'? Voltage Valley responds to short seller's damaging report

A report from a stock market research firm currently short-selling Lordstown Motors Corp. appears to cast doubt on the substance of its 100,000 pre-orders for the all-electric Endurance pickup truck.
2020-08-03 burns lmc 2
Lordstown Motors Corp. CEO Steve Burns sits inside the electric pickup truck-maker's Lordstown factory in this February 2020 file photo. (Photo provided)

LORDSTOWN — Voltage Valley leaders said they remain optimistic about Lordstown Motors Corp.’s prospects even after a lengthy, scathing report from a stock market research firm.

That firm, Hindenburg Research, is currently short-selling Lordstown Motors, and called its demand a “mirage.”

The article, published Friday by Hindenburg, appears to cast doubt on the legitimacy of the startup’s about 100,000 non-binding pre-orders for its all-electric pickup truck, the Endurance, which executives have said will reach full production later this year.

Those projections also appear to be in jeopardy, based on an account from an unidentified former Lordstown Motors employee, which is included in Hindenburg’s report.

Lordstown Motors Corp. CEO Steve Burns said Hindeburg’s report was full of half-truths and lies in an interview with the Wall Street Journal early Friday and said the company is still on-track to begin mass-producing the vehicle in September.

Burns did not comment on the report to Mahoning Matters Friday. A Lordstown Motors spokesperson, however, on Friday evening said the company is preparing to release a “thorough” statement — “and when we do we will absolutely be refuting the Hindenburg Research report.”

Hindenburg stands to gain from any loss in Lordstown Motors Corp. stock. The firm currently holds a short position in the stock, meaning it borrowed then sold shares of the company which it later expects to buy back for cheaper, after the stock has lost value.

News outlets began circulating the Hindenburg report Friday morning. Shares of Lordstown Motors Corp. (NASDAQ: RIDE) fell nearly 17 percent to $14.78 by close Friday, down from Thursday’s close of $17.71.

Though Burns has said the company expects to begin mass-producing the Endurance in September, a former Lordstown Motors employee told Hindenburg the company could be facing several years of delays, partially due to “drastic” design modifications such as changes to the exterior made in January.

That’s the same month the first Endurance road-test vehicle caught fire just 10 minutes after hitting the road, according to 21 WFMJ-TV.

Invested in Voltage Valley

Former state senator Sean O’Brien, who worked closely with the company after it moved into the 6.2-million-square-foot former General Motors Lordstown Assembly Complex in November 2019, said he visited the plant just weeks ago and it appeared the company was “moving in the right direction.”

“I think significant progress has been made and we’ll have to wait and see,” he told Mahoning Matters Friday. “There’s always naysayers and there always have been. People told me they wouldn’t get this far. They told us that from the first time me and [State Sen. Michael Rulli] went down there.

“I remain optimistic.”

Hindenburg's report suggests the company’s investors are being misled, claiming the Endurance’s pre-orders were simply hype meant to inflate its stock and that the company actually paid a consulting firm to create them. Those entities that signed letters of intent to purchase Endurance trucks made no deposits for them and are under no obligation to actually buy them.

One of the Endurance’s larger sales prospects was for 14,000 trucks, which would have a $735 million price tag, according to Hindenburg. That late December order came from E Squared Energy, which Hindenburg reports is a small, two-person consulting company operating out of a modest apartment in Texas, and doesn’t actually own or operate a vehicle fleet.

Burns confirmed to the Wall Street Journal the company did hire outside consultants to generate the pre-orders as a way to assess demand for the vehicle. He remains confident in that demand.

E Squared CEO Tim Grosse did not return a call from Mahoning Matters Friday. Though E Squared doesn’t have its own fleet, it works with customers who do, Grosse told The Business Journal Friday.

“If a guy signed a piece of paper that said, ‘I think I can move x-thousand of them,’ we believe them,” Burns told the Wall Street Journal Friday. “But it’s not in blood. It’s a non-binding letter of intent.”

Lordstown Mayor Arno Hill told Mahoning Matters Friday it’s been well-known that Lordstown Motors’ pre-orders were non-binding.

Currently, Lordstown Motors is developing dozens of “beta” vehicles which will be used for safety standards testing. Hill said he remains confident in the activity he currently sees at the plant.

“I don’t know how much validity this report has. … I want to reserve judgment and I’m hoping for the best,” he said.

Though U.S. Rep. Tim Ryan of Howland, D-13th, has long touted the promise of his district’s rebranding as “Voltage Valley,” his office declined to comment on the Hindenburg report.

“We can’t comment on that,” reads a text message from a spokesperson who didn’t offer a reason for declining, when asked.

Tax credits approved for new jobs

Lordstown Motors never asked for a tax abatement from Lordstown Village, Hill said. It also never received an abatement from Trumbull County officials.

The Ohio Tax Credit Authority, however, in December approved Lordstown Motors for a 1.6-percent, 15-year state tax credit worth $20 million, on expectations it will create 1,570 new full-time jobs.

Those jobs are expected to generate $91.2 million in payroll each year through 2025, from which the company will later claim its tax credit. It’s expected to file annual reports with the Ohio Development Services Agency, the first of which is due in March 2022, according to a spokesperson.

Under the agreement, Lordstown Motors pledges to remain in operation for at least 18 years.

Some of the dozens of workers hired thus far at Lordstown Motors are former members of United Auto Workers Local 1112, many of whom lost their jobs when General Motors closed the former GM Lordstown complex in March 2019, said Tim O’Hara, the shop’s former president.

“I hope, for their sake — I’d hate to see them get another job and then the same thing happens to them that happened with GM,” he said. “Of course, there’s a lot of hopes resting on Lordstown Motors and [GM’s Ultium Cells] battery facility, as far as jobs are concerned.”

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