The top two executives at Lordstown Motors have resigned as problems continue to mount at the Ohio electric truck startup
The top two executives at Lordstown Motors have resigned as problems at Ohio electric truck startup Mt.
CEO Steve Burns and Chief Financial Officer Julio Rodriguez stepped down, the company said early Monday, sending shares already down 40% this year to fall more than 21%.
Yet Lordstown ran into trouble not long after it became a publicly traded company last year through a merger with a special-purpose acquisitions company. Going public through so-called SPACs is usually quicker than traditional initial public offerings that are typically handled by major financial institutions.
In January an endurance pickup truck prototype caught fire in 10 minutes of its initial test drive in Michigan. Then the company failed to pay $570,000 in real estate taxes in early March.
Shares of the company have been in a sharp, downward trend since February and the stock fell below its initial public offering price of about $10 on Monday.
It could be worse.
According to FactSet, Burns, the late CEO, is the company’s largest shareholder with a 26.25% stake.
According to Morgan Stanley’s Adam Jonas, investors who remain still don’t want to stick around to find out what happens and when Burns starts to unload their shares.
This dynamic is at play in the form of increased scrutiny of Lordstown’s operations, which it was partially protected when it went public through SPAC.
Compared to the traditional process of an initial public offering, SPAC can cut the time it takes for a company to trade stock on an exchange by up to 75%. SPACs can also make it easier to get potential buyers on board. For example, companies going the SPAC route often feel more licensed to highlight the large growth projections they’re expecting in the future. In a traditional IPO, the company is limited to highlighting its past performance, which may not be a good selling point for young startups that usually fail to generate big profits or revenue.
Investors in Lordstown include General Motors, which took a 5% stake. Spokesman Jim Cain said Monday that the company’s investment remains unchanged.
Lordstown on Monday named principal independent director Angela Strand as executive chairman and said she would oversee the organization’s transition until a permanent CEO is found. Strand is the managing director of the advisory firm Strand Strategy.
Becky Roof, who has been interim chief financial officer at Eastman Kodak, Hudson’s Bay and Saks Fifth Avenue, was named interim CFO at Lordstown.
The company has hired an executive search firm to seek a new CEO and chief financial officer.
Also on Monday, the company responded to a scathing March report by short-selling firm Hindenburg Research that questioned the number of pre-orders the company had received for its marquee endurance vehicle.
The report sparked four potential class-action lawsuits against Lordstown by investors who claim they were defrauded.
Lordstown said its independent investigation found that much of the Hindenburg report was baseless. However, it acknowledged that a potential buyer who pre-orders large numbers does not have enough resources to make those purchases. The company said Monday that other pre-orders appear too vague or weak.
AP Business Writer Stan Cho in New York and AP Auto Writer Tom Crischer in Detroit contributed to this story.