The investment research firm that exposed Nikola’s false claims last year has set its sights on Lordstown Motors. Hindenburg Research postulates that Lordstown Motors hasn’t been truthful with their investors and the public about their ability to produce vehicles on schedule. They also believe that many of Lordstown’s orders for all-electric trucks are “fictitious”.
Hindenberg said, “Lordstown is an electric vehicle SPAC with no revenue and no sellable product, which we believe has misled investors on both its demand and production capabilities.”
The allegations by Hindenburg Research are troubling. They claim that their research found $28 million in stock have been offloaded by directors and executives since Lordstown went public with a SPAC in October 2020. One purported deal for 14,000 trucks with E Squared Energy to the tune of $375 million “is based out of a small residential apartment in Texas that doesn’t operate a vehicle fleet.” Another $52.5-million-dollar order for 1,000 trucks by a two-person startup has been claimed false by the owner.
The first test of the new Lordstown EV truck in January resulted in a vehicle fire ten minutes into the drive.
On Friday, Hindenburg said, “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.” They stated that a senior staff told them that “while working with [CEO and founder Steve Burns], they saw more questionable and unethical business practices than they had seen in their career.”
The Hindenburg Research website was not working for some time on Friday morning.
Similar structure to Nikola’s short sale
In September, Hindenburg published a damning report on hydrogen-fueled truck maker Nikola. Just two days after a major deal was announced with General Motors, Hindenburg dealt a blow, claiming that Nikola had not been truthful with their investors – specifically that the truck was “an intricate fraud built on dozens of lies”. The deal with GM was restructured as a result.
Hindenburg held a short position in Nikola stock. The day after the report was publicized, the stock dropped by 9.5% and short sellers made $51 million. Nikola hit back at Hindenburg, stating, “This was a hit job for short sale profit-driven by greed.”
Despite publicly rejecting all of the claims, Nikola’s founder Trevor Milton stepped down. Subsequently, several statements were disclosed by Nikola to be inaccurate in some capacity.
Worrisome trend in the auto industry
Hindenburg also performed a similar maneuver with China-based Kandi Technologies Group last year, taking a short position on the stock for the NASDAQ-traded company before issuing a cutting report. It poses questions for the auto industry including the relevance of startups and SPAC-backed companies. It appears carmakers are subject to volatility with strong-voiced claims from companies that stand to gain millions by tarnishing reputations, whether true or unfounded. Any publicly-traded company – major carmakers notwithstanding – are safe from an attack intended for short sale.
The allegations made by Hindenburg Research, who likely stands to profit millions with their short position in Lordstown Motors, have yet to be substantiated but the industry impact is significant.
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