Electric vehicle start-up Lordstown Motors said Tuesday it does not have enough money to start commercial production and runs the risk of failing as a business, sending its stock tumbling.
The company on Tuesday amended its annual report with the Securities and Exchange Commission to say in one year it may no longer function as “a going concern”.
The company said that with its current cash and cash equivalents of $587m as of the end of the first quarter, it did not have enough funding to launch the Endurance, an electric pick-up truck geared toward commercial operators.
“These conditions raise substantial doubt regarding our ability to continue as a going concern,” the company said in the filing.
Lordstown said it was attempting to find more funding but could not guarantee it would be successful. It shares plunged 16 per cent to close at $11.22 and continued falling in after-hours trading.
The company has reeled since it was accused earlier this year by a short seller of inflating orders, which it denies.
Lordstown Motors first attracted attention in 2019 when it took over a former General Motors plant and promised to hire 400 workers to build electric vehicles there. President Donald Trump had lambasted GM after it closed the plant in Ohio, a politically important state in the Midwest.
GM loaned Lordstown Motors $40m for the purchase and also invested $75m in the company.
The bid to secure the factory initially came from Workhorse Group, which was run by Steve Burns, who is now chief executive at Lordstown. The auditor for Workhorse raised questions in 2018 about whether it could continue to function as a going concern. Workhorse Group, another electric vehicle start-up, licenses technology to and owns 10 per cent of Lordstown.
Short seller Hindenburg Research published a report in March accusing Lordstown of inflating its order book, which triggered an SEC inquiry. Lordstown has denied that it overstated its pre-orders.
But in May the Ohio company’s executives said they would slash production of the Endurance and search for additional capital, prompting its shares to fall.
The company revealed more detail on Tuesday about the regulatory investigation, saying it had received two subpoenas from the SEC. One is related to pre-orders and one to its August 2020 merger with DiamondPeak Holdings, a special purpose acquisition company.
Lordstown also said in Tuesday’s filing that it found “material weaknesses” in its processes to disclose information to investors. It said it did not have enough people with “appropriate technical accounting skills” overseeing financial reporting or an effective process to assess the risk of material misstatements.
The company is hiring additional employees to address the problem, but “there is no assurance we will be successful in remediating the material weaknesses”, the filing said.
At the end of the first quarter, the company reported an accumulated deficit of $260m and a quarterly net loss of $125m.