Allegations against US start-up: Is Lordstown Motors the next Nikola?

Allegations against US start-up: Is Lordstown Motors the next Nikola?

Allegations against US start-up: Is Lordstown Motors the next Nikola?

The world’s first electric pick-up truck, made in the USA: With this promise, the start-up Motors from the US state of Ohio has caused a sensation in recent months – and attracted investors. Even former US Vice President Mike Pence visited the founders last summer and praised the innovation and “incredibly hard work” of the start-up.

Now the company has to face serious allegations: The short sale investor Hindenburg Research attacked Lordstown Motors in an online article. The number of pre-orders, the planned start of production, the credibility of the boss – all this casts the shortsellers into doubt.

The share price fell in double digits at times, investors are unsettled. It is true that the goal of short sellers like Hindenburg is for companies to fall because they earn money from it. But Hindenburg is no stranger: It wasn’t until September that the stock market activists. With success: the company later admitted that it was unable to dispel several allegations.

That makes the attack against Lordstown particularly explosive. Hindenburg accused the start-up of faking orders on a large scale. Many of the allegedly 100,000 pre-orders are fictitious, for example from mailbox companies or a two-person company that even admitted upon request that it had pre-ordered 1000 trucks only for marketing reasons.

Hindenburg also doubts the announced production start of Lordstown in September 2021. A former employee reported significant delays. The truck will more likely roll off the assembly line in an estimated three to four years. Worse still: In January, a test vehicle went up in flames after driving only ten minutes – which Hindenburg wants to prove with a police report.

Hindenburg also massively attacks the founder and boss Steve Burns: Several leading ex-employees called the entrepreneur a “Con-Man”, ie a fraudster. Hindenburg continues: “One executive told us that in the years he worked with Steve he saw more questionable and unethical business practices than in his entire career.”

Electric hope in the rust belt

The start-up may now face massive damage to its image. Lordstown Motors announced that the report would be responded to “in a timely manner”. News about the start of production of the “Endurance” will be announced in a conference call on Wednesday. Endurance, as the pick-up is called, means endurance.

Lordstown founder Burns should be able to use them in the next few days. In the past few months he was seen as a beacon of hope for the troubled US economy. Lordstown is named after the town in Ohio where the start-up is based. The district is located in the so-called rust belt – the oldest industrial region in the.

From 1966 to 2019, the carmaker manufactured various car models in Lordstown, until the group shut down the plant, which last had 1,500 employees. In November 2019, Lordstown Motors bought the vacant factory and announced that it would manufacture its electric pick-up here. That is “great news”, enthused US President Trump in capital letters.

Parallels to the dispute over Nikola

“It’s a great new start for Lordstown and a great new start for electric vehicles in the US,” said Vice President Pence during his visit last summer. Lordstown, the “city of desperation”, as the Pro Publica network called it, had become a place of hope.

Also for a whole range of investors: Lordstown Motors went public in the fall, as is currently the case with so many tech start-ups. Also invested $ 25 million in the start-up and loaned it an additional $ 40 million after the factory was sold.

This is of particular interest to WiWo readers today

Amazing parallels to that: General Motors had invested here too. Here, too, the reputation of the founder is in doubt – and many of his cocky announcements. Today Nikola is under new management and, according to his own statements, continues to work on his trucks. The share price, however, is still six times lower than it was a year ago.