Lordstown Motor, an electric pickup truck startup that became a billion-dollar company after going public, is seeing its hype train slow down after a prototype caught on fire and its vast order book is called into question.

The company was founded out of a deal to take over GM’s Lordstown factory just a few years ago, and they plan to bring an electric pickup truck to production this year.

We previously stated that the timeline was extremely ambitious due to the fact that the factory needs to be completely retooled, and Lordstown is trying to bring to market the first passenger vehicle with in-wheel hub motors, which is an untested technology in pickup trucks.

Lordstown went public through a SPAC deal last year and saw its valuation soar to up to $4 billion.

The company saw its stock prices on several announcements including the fact that they secured over 100,000 orders for their Endurance pickup truck.

Now Lordstown’s rise on the stock market has stopped in its tracks as the stock fell 45% over the last month and the company’s market cap has dropped to $2 billion.

Part of the drop is attributed to a report from Hindenburg Research, which made its name by taking down Nikola Motors last year. The firm highlighted a lot of problems with some of Lordstown’s claims, as well as a massive setback in its test program.

They shared a police report describing one of Lordstown’s very first prototypes catching on fire in Michigan in January.

The officer wrote in the report:

Upon arrival, I observed the truck fully engulfed in the castbound 12 Mile Rd. lanes just east of Copper Creek Lane.

I spoke with the driver of the vehicle. Pirakalathan Pathmanathan, who advised me that he was the director of powertrain for Lordstown Motors. Pathmanathan explained that the vehicle was a 2021 Lordstown Endurance that had cleared testing inside of the facility. Pathmanathan stated that this was the first road test for the Endurance and added that it s a fully electric truck. Pathmanathan said that he took two of his coworkers, Simone Palombi and Akshay Sharma, for the road test with him and they were in it for about 10 minutes before it caught on fire.

I asked Pathmanathan what happened and he stated they were driving the vehicle and noticed the truck was driving weird. Pathmanathan stated he pulled over and the Endurance [caught] on fire from underneath the truck.

Here are a few pictures of the incident:

Lordstown said that the issue was due to a “human error” and putting the vehicle together and claims that the process has now been automated, which should fix the issue.

However, it’s hard not to consider this as a setback in Lordstown’s test program, which only has a short time to be completed before production.

But the incident wasn’t really the focus of Hindenburg’s report, which mostly revolves around the quality of Lordstown’s “orders” for the Endurance pickup truck.

Hindenburg dove into some of those agreements to demonstrate that most of them are not binding, and in some cases, they even talked to the companies who placed those “orders,” and they admitted that they have no plans to go through with the orders:

  • The company has consistently pointed to its book of 100,000 pre-orders as proof of deep demand for its proposed EV truck. Our conversations with former employees, business partners, and an extensive document review show that the company’s orders are largely fictitious and used as a prop to raise capital and confer legitimacy.
  • For example, Lordstown recently announced a 14,000-truck deal from E Squared Energy, supposedly representing $735 million in sales. E Squared is based out of a small residential apartment in Texas that doesn’t operate a vehicle fleet.
  • Another 1,000-truck, $52.5 million order comes from a two-person startup that operates out of a Regus virtual office with a mailing address at a UPS Store. We spoke with the owner who acknowledged it won’t actually order any vehicles, instead describing the “pre-order” as a mere marketing relationship.
  • Yet another firm that is supposedly set to buy 500 trucks from Lordstown told us: “…The letters of interest are non-binding. It’s not like you’d obligate yourself to a pre-order or that you would contractually bind yourself to buying this truck. That’s not what they are.”
  • Lordstown CEO Steve Burns has called these arrangements “very serious orders.” The actual customer agreements, which we present for the first time today, require no deposit and are non-binding. Many of the supposed customers do not operate fleets nor do many have the means to actually make the stated purchases.

The firm does present some significant evidence of those claims in its report, but it does disclose that the publication of its research is motivated by a short position that they have taken on Lordstown’s stock.

Following the report, the SEC has reportedly launched an investigation into the company, which is playing out in a very similar way to the events following Hindenburg’s report on Nikola Motors.

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