On March 12, Hindenburg Research, the short seller that previously levied allegations of fraud at Nikola Corp., set its sights on another zero-emission vehicle maker. According to its findings, Lordstown Motors Corp. (LMC) has misrepresented the demand for its battery-electric pickup truck, the Lordstown Endurance, which is still in pre-production and testing Beta prototypes.
“Our research has revealed that Lordstown’s order book consists of fake or entirely non-binding orders, from customers that generally do not even have fleets of vehicles,” the report alleged.
LMC, which went public in October by combining with special purpose acquisition company DiamondPeak Holdings Corp., has claimed to have garnered more than 100,000 pre-orders for the Endurance. These are non-binding and require zero money down, and according to Hindenburg, are often from companies that would not be able to afford the number of trucks they tentatively agreed to order.
One such company, E Squared, placed a pre-order for 14,000 trucks, which would generate $735 million in revenue for LMC. Records cited in the report show the energy consulting firm has two employees and the business mailing address leads to an apartment.
“We’re a legitimate service program,” asserted E Squared CEO Tim Grosse to The Business Journal of Youngstown, Ohio. “We buy vehicles for municipalities and customers who don’t have large budgets to switch to EVs.”
Grosse pointed out that as a short seller, Hindenburg had a financial interest in LMC stocks plummeting. “I think it’s obvious what the report was intended to do,” he said.
The report lists several other potential customers with questionable commitment. The first major pre-order touted by LMC last April came from a Florida company called Innervations that assists fleet in the transition to EVs. It was for 1,000 vehicles and gave LMC immediate legitimacy in a crowded field of electric pickup makers, from Ford with its electric F-150 to Rivian and Tesla. Innervations describes its team as “influencers,” and not a serious buyer.
“What we do is we host and support events with companies and then we invite Lordstown Motors to the event to show the product,” said David Hein, one of the two names listed on Innervations corporate documents, to Hindenburg Research. “We just direct the company to Lordstown directly.”
As of the morning of March 22, LMC ’s stock (Nasdaq: RIDE) were down 25% since the report came out. The Security and Exchange Commission has also expressed a desire for information from LMC.
LMC founder and CEO Steve Burns said in an earnings call last week that the company is complying with the SEC and the Board of Directors has also created a committee to review the situation.
Burns also attempted to mitigate the damage to his company’s reputation by appearing on CNBC.
After being pressed on if he regrets hyping pre-orders, Burns said, “I don’t think anybody thought that we had actual orders. That’s just not the nature of this business.”
Burns said the pre-orders were to “gauge interest” and allow LMC to scale tooling at the Lordstown, Ohio, plant. Burns said the plant, bought from General Motors after the automaker shut down production in 2019, would be able to produce one truck every six minutes.
Hindenburg provided evidence the only thing LMC has so far successfully manufactured is hype. A consulting firm called Climb2Glory was apparently involved in generating pre-orders — $50 for each. In 2016 while Burns was CEO of Workhorse (which makes electric vans), that company was accused of buying pre-orders for $30 each.
Workhorse has a 10% stake in LMC.
LMC also planned to release an electric van this summer, though Hindenburg questioned if and when the Endurance would start production. LMC still projects a September production start date, despite a former employee allegation that the pickup “doesn’t even have 1,000 miles of testing right now, let alone a million,” a standard durability testing benchmark for the industry.
The report also impugned Lordstown’s ethics, referencing a California lawsuit involving EV maker Karma Automotive. Karma was at one time in talks with Lordstown to license its infotainment technology, though following events indicated the EV startup instead poached the Karma employees with intimate working knowledge of the technology, and that they engaged in trade secret theft. Karma also discovered a cost/benefit analysis emailed to one of the poached worker’s Karma email address that estimated Lordstown would save $4.6 million by hiring the Karma employees rather than enter into a licensing agreement.
The report overall characterized Burns as a “P.T. Barnum” type figure with a penchant for “magical thinking” over a serious auto executive. LMC has never lacked excitement, from its potential for reinvigorating a Rust Belt region with hope after GM abandoned it, to big press events at the White House last October with President Donald Trump, or the Endurance reveal at the Lordstown plant last June attended by former Vice President Mike Pence.
At the time, Burns said the plant could someday produce 600,000 Endurance pickups per year. The truck itself would be like nothing else on the road, with Burns claiming, “We have the best traction of any truck ever made,” and “we will be the safest pickup truck ever made.”
This January, an Endurance prototype being road tested for the first time caught on fire after 10 minutes, according to a Michigan police report obtained by Hindenburg.
