Signage outside the Lordstown Motors Corp. headquarters. in Lordstown, Ohio on Saturday, May 15, 2021.
Dustin Franz | Bloomberg | Getty Images
Lordstown Motors shares climbed into positive territory on Wednesday afternoon after the electric truck maker announced it was in talks with multiple parties to raise funds.
The disclosure came a day after Lordstown warned in a US registration application that there were “significant doubts” about its ability to continue for the next year due to problems financing the production of its vehicle.
Lordstown’s shares rose 2% on Wednesday afternoon. They slumped up to 20% earlier in the day as investors woke up to a very different financial picture than Lordstown last August when it announced it would go public through a reverse merger with a blank check company.
Lordstown confirmed in a statement Wednesday that it has “sufficient capital to continue operations, meet supplier obligations and start limited production,” but need to raise additional funds and have been under discussion.
“We are debt-free, have significant property, plant and equipment and several viable sources of capital, including asset-backed financing, equity, equity or debt financing, loans and potential longer-term strategic investments,” the company said. “We are already in active discussions with multiple parties to do this.”
On a conference call last month, Chief Executive Steve Burns said the Ohio company needed more capital to bring its endurance pickup to market, and production this year would be half of previous expectations.
Lordstown’s situation has cast doubt on the projections the company made on August 3, 2020 when it announced its deal to go public through a reverse merger with special purpose vehicle DiamondPeak Holdings (SPAC). The deal was closed in October.
In March, Lordstown’s shares plummeted after Hindenburg Research announced it had taken a short position in the stock and said the company misled consumers and investors when they asked for its vehicle to hope for them Buy back at a cheaper price and pocket the difference.
Lordstown went on to say the US Securities and Exchange Commission asked for information about their SPAC merger and pre-orders for their vehicles. Burns said Lordstown is cooperating with the investigation.
SEC officials did not respond to a request for comment on Wednesday.
The company is also facing class action lawsuits related to the Hindenburg report.
On Wednesday, Hindenburg founder Nathan Anderson said in an email: “After months of denial and cover-up, Lordstown is finally beginning to acknowledge its precarious financial position and unrealistic production projections.”
RBC Capital Markets analyst Joseph Spak began reporting on Lordstown Tuesday with an “underperform” rating and a price target of $ 5. He believes Lordstown will need $ 2.25 billion in additional capital to remain solvent by 2025 and won’t break even until 2025, three years according to company projections.
Working on a loan from the energy department
When Lordstown alerted investors last month that more money was needed, Lordstown blamed Covid-19 and industry-wide issues for higher spending on parts, shipping and third-party technical resources.
Lordstown said options to raise money could include asset-backed financing and investments from strategic partners such as other automakers. However, Burns, the company’s largest shareholder, said Lordstown is not for sale.
Lordstown also hopes to land a $ 200 million loan deal with the US Department of Energy (DOE) to cover the cost of upgrading its factory. Gaining approval from energy officials could be key to allaying concerns from some investors.
Lordstown has been touting the prospect of the loan since last August, and Burns said last month he hopes to complete that process in the next few months. DOE officials declined to comment.
When Lordstown announced the SPAC deal, the company boasted that its electric truck would be the first to hit the market to serve commercial fleet customers. It has confirmed its launch date for September, but the lower production forecast undercuts the lead Lordstown has Ford Motor, which will launch an electric version of its best-selling full-size pickup truck, the F-150 Lightning, next spring.
At the time of the SPAC announcement, Lordstown said it had 27,000 pre-orders for the Endurance, valued at $ 1.4 billion, and then increased that total to more than 100,000. Following Hindenburg’s report, Lordstown said the orders were non-binding and on Tuesday it said it had no binding orders.
Targeting the same commercial customers, Ford has stated it has 70,000 reservations that require a $ 100 deposit on its truck.
Lordstown said the Endurance will have a starting price of $ 52,500 before federal tax incentives apply to electric vehicles. Ford’s F-150 Lightning starts at just under $ 40,000.
Investors in the first SPAC deal included Fidelity Management & Research, Wellington Management, Federated Hermes Kaufmann Small Cap Fund, and BlackRock. BlackRock declined to comment on Wednesday and officials from the other companies were unavailable for comment.