Electric truck start-up Lordstown doesn’t have cash to begin production.

Source: By Neal E. Boudette and Matthew Goldstein, New York Times • Posted: Wednesday, June 9, 2021

Lordstown Motors, an electric vehicle start-up that aimed to revive a shuttered General Motors factory in Ohio, said on Tuesday that it did not have enough cash to start commercial production of its electric pickup truck and might have to close its doors.

The company, which was once held up as a savior by former President Donald J. Trump, is now being investigated by the Securities and Exchange Commission. In a regulatory filing, Lordstown said it will not be able to begin “commercial scale production” without raising more money from investors and lenders.

Lordstown, one of about a dozen start-ups in the electric vehicle space that have gone public by merging with special purpose acquisition companies, or SPACs, added that there was “substantial doubt regarding our ability to continue as a going concern” — a legal phrase companies often use to alert investors that they might not survive. The company had $587 million in cash at the end of March, down from more than $629 million at the end of last year.

The filing will likely increase doubt about the viability of businesses that have merged with SPACs, which have been criticized by some investors and analysts for doing a shoddy job of vetting the businesses they acquire. Many of the SPAC deals in the electric vehicle space have been particularly precarious because it takes a lot of expertise, money and time to create an auto company capable of mass-producing cars and trucks.

Lordstown has been on shaky ground for months. On Friday, the company said the Nasdaq stock exchange could delist its shares because it was late in filing its quarterly report with the S.E.C. The company offered no explanation for the delay, but it may have been related to an accounting changethat securities regulators issued for companies that have merged with SPACs.

Lordstown’s stock fell sharply on Tuesday, closing down more than 16 percent, to $11.22 a share. It fell a bit more in extended trading.

The S.E.C. said this year that warrants awarded in SPAC deals had to be accounted for as debt or a liability on a company’s balance sheet. A warrant grants an investor the right to buy shares at a preset price. Before the accounting change, most warrants were treated as stock and not debt.

Lordstown, in its quarterly filing, reported a net loss in the value of its warrants of about $19 million. The company also reported $82 million in cash proceeds from the exercise of warrants during the quarter.

Just last month, the company said it was on track to start production in September, although it said it would make only about 1,000 trucks by the end of the year — half as many as it had originally planned — if it was unable to raise more money.

The company said it was considering issuing new stock or borrowing money. “As we seek additional sources of financing, there can be no assurance that such financing would be available to us on favorable terms or at all,” the company’s filing said.

Lordstown also said it was reducing its spending to conserve the cash it had on hand, without saying whether it might cut jobs. Company representatives did not respond to a request for comment.

The company was founded by its chief executive, Steve Burns, who previously headed another electric vehicle business, Workhorse Group. Lordstown was created after G.M. decided in 2018 to shut down a plant that had made the Chevrolet Cruze sedan.

Mr. Trump attacked G.M. for closing the factory and demanded that the automaker sell it to someone else. G.M. sold the plant to Lordstown for just $20 million in 2019 and later lent the start-up $40 million. G.M. still owns 7.5 million shares in Lordstown.

Lordstown became a publicly traded company in October when it merged with Diamond Peak Holdings, a SPAC created by a former Goldman Sachs banker who had no experience in the auto industry. The deal was completed in just two months.

In its Tuesday filing, Lordstown revealed that it had received two subpoenas from the S.E.C. seeking documents and information, including about its deal with Diamond Peak. The company said it was cooperating with regulators.

Lordstown also said it restated a portion of its 2020 annual report after determining it had found “material weaknesses” in its financial reporting. The company said it did not have enough employees with “appropriate technical accounting skills and knowledge.”

The company said it was hiring more skilled employees. But it warned that it might not be “successful in remediating the material weaknesses.”

 

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