U.S. electric truck maker Lordstown Motors Corp (RIDE.O) said on Tuesday there was “substantial doubt” about its ability to continue as a going concern in the next year because of problems funding the production of its vehicle, causing its shares to plummet.
Lordstown, which went public last year through a reverse merger with a special-purpose acquisition company (SPAC), has struggled with the launch of its Endurance pickup truck. The truck is being built at a former General Motors Co (GM.N) plant in northeast Ohio.
Several electric vehicle makers over the past year have gone public via mergers with SPACs, bypassing the rigorous scrutiny of a traditional initial public offering process.
"The company believes that its current level of cash and cash equivalents are not sufficient to fund commercial scale production and the launch of sale of such vehicles," Lordstown said in a Tuesday quarterly filing with the U.S. Securities and Exchange Commission.
"These conditions raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year," the company added.
Lordstown's shares fell 16.3% in regular trading and were down 5.7% in after-hours trading.
A Lordstown spokesman declined further comment, pointing to statements made by the company during its earnings call last month.
Lordstown said on the call that its Endurance production this year would be half its prior expectations and it needed additional capital to execute its plans. It blamed COVID-19 and industry-wide related issues for higher spending on parts, shipping and third-party engineering resources. read more
In March, Lordstown's shares slumped after Hindenburg Research disclosed it had taken a short position on the stock, saying the company had misled consumers and investors.
Short sellers bet the price of a stock will fall by borrowing and selling shares in the hope of buying them back at a cheaper price and pocketing the difference.
Lordstown subsequently said the SEC had asked for information related to its merger with SPAC DiamondPeak Holdings and preorders of its vehicles. Chief Executive Steve Burns said Lordstown was cooperating with the agency's investigation. read more
GM, which is a minority shareholder in Lordstown, declined to comment on Lordstown's Tuesday filing.
During the May 24 earnings call, Lordstown said options to raise money 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.
Burns said on the call that the launch of the Endurance, which is targeted at commercial customers, remained on track for September. On Tuesday, however, Lordstown said it had done "limited marketing activities" around the truck and had no binding purchase orders or commitments from customers.
Lordstown reported a first-quarter loss of $125 million, and said it had cash and cash equivalents of about $587 million.
At a June 2020 unveiling of the Endurance at its Ohio plant, then U.S. Vice President Mike Pence credited President Donald Trump with fighting for American jobs in the Mahoning Valley region where the plant is based.
"Today is a new beginning for Lordstown and it's a new day of leadership in electric vehicles in the United States," Pence said at the time. "Today is one more example of President Trump's commitment to make American manufacturing great again."
The plant’s fate became a political lightning rod after GM announced its planned closure in November 2018, drawing condemnation from Trump and many U.S. lawmakers. Lordstown bought it and equipment for $20 million.
