Lordstown Motors, an EV start-up, have lost their two main employees as questions are raised over their claimed pre-order numbers.
CEO Steve Burns and CFO Julio Rodriguez have both stepped away from the firm, with no reason for either departure being given by the firm. However a recent report, by Hindenburg Research, has put a spotlight on the company, claiming that Lordstown have been "inflating orders, exaggerating the viability of the technology used in one of its planned electric pick-up trucks and overpromising on when production of the vehicle might begin. Much as the company aren't saying this is the reason for the departures, and the report was issued in March, the combination of these two events is troubling for both the company itself, and any investors.
One issue this might raise for them, legally speaking, is what happens to both the outgoing executives, and the company, should these claims turn out to be correct. Investors will not be happy that they have parted with their money based on false figures, and would surely have a claim against both the company, and the individuals involved for something which amounts to fraud. Coming away from the civil suit side of things, there will be people that argue that, should it be proven that the executives knowingly lied to their investors, nothing short of prison time would suffice for punishment.
This is all going to be very troubling for independent director, Angela Strand, and interim CFO, Becky Roof, who are stepping in to lead the firm until a permanent solution can be found, particularly as Lordstown amended their annual report the SEC last week, saying that they may no longer be functioning this time next year. If that should happen then a lot of investors will be short of significant amounts of money, with little to no hope of recuperation.
Somewhat unsurprisingly, Lordstown themselves have hit back at the Hindenburg Report, claiming that the Report's "challenges to the viability of Lordstown Motors’ technology and timeline to start of production are not accurate," They did, however, admit that their stated pre-order demand was too high.
With a company's future, and a lot more. on the line, this will be an interesting story to watch develop. IT also begs the question whether firms, such as Lordstown, are able to get the capital to compete with the industry heavyweights, without crossing the line. Remember this is a similar admission to the one made by Nikola mere months ago.
-written by Duncan Balcon for the KC Partner's Legal Brief - Full publication available at https://www.linkedin.com/company/kcpartners-ltd/posts/?feedView=all