Band Ben Klayman and Chris Prentice
DETROIT / WASHINGTON, June 9 (Reuters) – Lordstown Motors Corp RIDE.O shares fell more than 18% on Wednesday, as investors realized a very different financial situation than the electric truck maker last August when it announced it would go public through ‘a reverse merger with a blank check company.
Lordstown on Tuesday warned in a US regulatory filing that there was “substantial doubt” about its ability to continue operating next year due to problems with financing the production of its vehicle.
Last month, chief executive Steve Burns on a earnings conference call said the Ohio-based company needed more capital to launch its Endurance pickup truck and this year’s production would be half expectations. earlier.
Lordstown officials did not immediately comment on Wednesday, but Burns has scheduled an appearance with the Automotive Press Association next Tuesday.
The Lordstown situation raised doubts about the company’s forecast on August 3, 2020, when it announced its IPO through a reverse merger with specialist acquisition firm (SPAC) DiamondPeak Holdings. The deal was closed in October.
Lordstown shares were down 18.3% to $ 9.17 in the early afternoon.
In March, Lordstown shares slumped after Hindenburg Research revealed it had taken a short position in the stock, saying the company had misled consumers and investors about demand for its vehicle.
Short sellers bet that the price of a stock will drop by borrowing and selling stocks in the hope of buying them back for a lower price and pocketing the difference.
Lordstown later said the U.S. Securities and Exchange Commission (SEC) requested information related to its SPAC merger and pre-orders of its vehicles. Burns said Lordstown was cooperating with the investigation.
SEC officials did not respond to a request for comment on Wednesday.
The company is also facing class actions arising from the Hindenburg report.
Hindenburg founder Nathan Anderson said in an email on Wednesday: “After months of denials and obscurations, Lordstown is finally starting to recognize its precarious financial situation and unrealistic production projections.”
RBC Capital Markets analyst Joseph Spak on Tuesday launched a Lordstown cover with an “underperformance” rating and a price target of $ 5. He believes Lordstown will need an additional $ 2.25 billion in capital until 2025 to stay solvent and won’t break even until 2025, three years after the company’s projections.
Alerting investors last month it would need more money, Lordstown blamed COVID-19 and industry-wide issues for higher spending on parts, shipping and resources. third-party engineering.
Lordstown said options for raising funds could include asset-backed financing and investments from strategic partners like other automakers. However, Burns, the company’s largest shareholder, said Lordstown was not for sale.
Lordstown is also hoping to strike a deal with the US Department of Energy (DOE) for a $ 200 million loan to help pay for the costs of retooling its plant. Winning the approval of energy officials may be the key to allaying the concerns of some investors.
Lordstown has been touting the prospect of the loan since last August and Burns said last month he hoped to complete that process in the coming months. DOE officials declined to comment.
When Lordstown announced the PSPC deal, it boasted that its electric truck would be the first to be marketed to serve commercial fleet customers. It has confirmed its launch schedule in September, but lower production forecasts are undermining the lead Lordstown has over Ford Motor Co. FN, which will launch an electric version of its best-selling full-size pickup, the F-150 Lightning, next spring.
At the time of the PSPC announcement, Lordstown said it had 27,000 pre-orders for Endurance worth $ 1.4 billion, and subsequently brought that total to over 100,000. After Hindenburg’s report, Lordstown said the orders were not binding and on Tuesday he said there were no binding purchase orders.
Ford, which targets the same business customers, said it has 70,000 reservations requiring a $ 100 deposit for its truck.
Lordstown said Endurance will have a starting price of $ 52,500 before federal tax incentives for electric vehicles. Ford’s F-150 Lightning will start at just under $ 40,000.
Investors in the original PSPC deal included Fidelity Management & Research Co, Wellington Management Co, Federated Hermes Kaufmann Small Cap Fund and BlackRock Inc. BLACK.N. BlackRock declined to comment on Wednesday, and officials at the other companies could not immediately be reached for comment.
General Motors Co GM.N, who invested $ 25 million in cash in Lordstown and an additional $ 50 million in in-kind contributions, including the Ohio plant, declined to comment.
(Reporting by Ben Klayman in Detroit and Chris Prentice in Washington Additional reporting by David Shepardson in Washington Editing by Matthew Lewis)
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