Lordstown Motors is seeking additional capital in order to begin production of its new Lordstown Endurance electric pickup.
The Ohio-based company, which purchased GM’s Lordstown Assembly plant in 2019, said in a regulatory filing on Tuesday that it has a “going concern” it will be able to remain operational in the coming months due to a lack of funding. Lordstown Motors CEO Steve Burns has scheduled a press conference with the Automotive Press Association next Tuesday, at which point he’s expected to provide a clearer picture of the situation the company is facing.
Lordstown Motors shares fell by more than 16 percent on Tuesday in the wake of the regulatory filing as investors bailed out of their positions in the struggling start-up.
GM owns 7.5 million shares of Class A common stock in Lordstown Motors, equivalent to an equity value of $75 million. The small stake in the company is representative of the value of the Lordstown Assembly plant and other minor contributions it made to help Lordstown begin re-tooling the plant. Auto industry analyst Sam Abuelsamid told The Detroit Free Press this week that GM could still retain the plant in Lordstown Motors were to go bankrupt, though this would depend on the details of the agreement between the two companies.
“It’s possible that GM could repossess the factory,” Abuelsamid told The Free Press. “If the debt was traded for equity and Lordstown Motors goes under, then GM would probably lose it all, although again depending on how the deal was set up they might get back the factory or something from a liquidation.”
Lordstown is still targeting a September production start date for the Endurance pickup, which is being marketed as a budget-minded electric pickup for fleet customers. However Burns acknowledged the production output for this year would “at best” be cut by around half of his initial 3,000-unit target.
The U.S. Securities and Exchange Commission launched an investigation into Lordstown Motors in May after a short-seller report published by Hindenberg Research claimed the automaker misled investors in order to raise capital. The company said previously that it had racked up 100,000 non-binding pre-orders for the Endurance, but Hindenberg says these preorders are “largely fictitious.”
“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,” the report said.
Lordstown Motors says it is co-operating with the SEC investigation.