Start-up electric vehicle maker Lordstown Motors is in a bit of trouble with the U.S. Department of Justice. The company is under investigation over allegations of corporate corruption. Lordstown was founded in 2018. With a mission to build electric pickup trucks, the company soon acquired the Lordstown Assembly facility, previously owned and operated by GM. General Motors subsequently invested $75M into the start-up and as part of the deal had a seat on the board of directors. Lordstown The Endurance show-stopping prototype pickup soon followed. It was, said Lordstown, a rival to the Tesla Cybertruck and Rivan RT1. The Endurance was scheduled for a 2021 release date. But as of now, it is nowhere to be seen. Behind the scenes, production was delayed due to problematic prototype testing. When a development vehicle reportedly caught fire Lordstown brushed it off as a result of human error.
Lordstown Motors said that it had acquired over 100,000 pre-orders. This news and a coinciding merger with a private equity firm boosted the company’s stock market price to over $1.6BN. However, an investment research firm that specializes in investigating short selling, Hindenburg Research, alleged that Lordstown town was nothing more than a front for fraud. The report highlighted allegations of non-binding, no deposit orders. In other words, Lordstown Motors was making up pre-order numbers. There are also reports that Lordstown used shell companies to generate a large majority of pre-orders.
The Hindenburg Research report also outlined Lordstown’s inability to manufacture at scale citing lengthy production delays that could halt production for up to three to four years. If production was ever the end goal. The organized chaos behind the scenes was well camouflaged. January 2021, Lordstown opened its first customer service center. June 2021, Lordstown states in a filing with the SEC that it does not have enough money to begin production and is at risk of failing.
One can only speculate where all the investment money has gone. The rush to goldmine the electric car industry will have many losers and a handful of winners. Whatever the intention of Lordstown Motors, there will be companies and or individuals out to exploit the electric car goldrush.
Investors don’t seem to understand that if it takes years for a legacy car manufacturer to scale production, how on earth can a start-up company prototype and manufacture 100,000 electric pickups in just four years? The issue isn’t just about Lordstown’s alleged criminality. Investors have to take a look at themselves. In this case, one of the investors, GM, had board-level access. The real question is, what did GM know?