By on March 12, 2021

Hindenburg Research, the firm that outed Nikola for overselling its technology in last year’s scathing report, has selected a new target. The company in its crosshairs this time around is Lordstown Motors. While the investment research firm stopped short of saying the Ohio-based manufacturer committed fraud, it came extremely close. On Friday, Hindenburg alleged that Lordstown is stringing investors along, will be unable to adhere to its existing production targets, and fabricated sales to make the business appear more appetizing.

“Lordstown is an electric vehicle [special purpose acquisition company] with no revenue and no sellable product, which we believe has misled investors on both its demand and production capabilities,” reads the report. “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.”

That’s just the opening statement. Hindenburg’s report goes on to list numerous issues. Former Lordstown employees apparently told the research firm that claims about in-house battery production were bogus, with the equipment necessary for the task still undelivered. This also means the company hadn’t tested anything, meaning vehicles that are supposed to start assembly in September haven’t been certified by the NHTSA as compliant with Federal Motor Vehicle Safety Standards.

But that’s just a production delay, something manufacturers run into all the time. The fact that the company is having to rejigger designs and wait on tooling isn’t a bombshell announcement in itself. We also hate to say this but special purpose acquisition companies (SPACs) always seem to overpromise so the stock can be puffed up. With no commercial operations, these “blank check” firms really only exist to help raise capital through an initial public offering.

Despite being inherently shady, it’s not technically illegal and hardly new. Hindenburg has not made it a secret that it loathes SPACs and seems to lavish every opportunity to turn a profit off their demise. But it also knows that it needs more if it’s to make Lordstown (which went public in October 2020) look bad — which is really what this is all about. Fortunately, it seems to have found something while examining the company’s claimed 100,000+ pre-orders.

From Hindenburg Research:

Our research has revealed that Lordstown’s order book consists of fake or entirely non-binding orders, from customers that generally do not even have fleets of vehicles. According to former employees and business partners, CEO Steve Burns sought to book orders, regardless of quality, purely as a tool to raise capital and confer legitimacy. In addition, we show how, in desperation to claim there was demand for the proposed vehicle, he paid for customers to book valueless, non-binding pre-orders.

We detail conversations with Lordstown “customers” who were eager to explain that the letters of intent (“LOI”s) with the company were “promotional”. Others assured us they were “not committed to anything” and that the pre-order commitment size recorded by Lordstown was “totally impossible”. One CEO at a ‘key’ customer told us our outreach was the first he had heard of any arrangement with Lordstown.

We also show, for the first time, the actual Lordstown pre-order agreements, which we received from former business partners. While the agreements entail zero commitment on the part of the “buyer”, they include clauses about the parties agreeing to work on press releases to announce the deals.

Assuming the claims are accurate, that’s fairly damning. But there are also suggestions that the Endurance prototypes are undergoing massive changes. Numerous employees apparently told the research firm that the model is probably 3-4 years away from production and would never be manufactured by the fall of 2021.

The report also goes into great detail to assassinate the character of CEO Steve Burns by listening to unfavorable characterizations made by his peers and some light speculation as to why he was ousted from Workhorse. That’s less interesting to us than accusations that the company essentially fabricated orders and is actually years away from production — and far less pertinent in deciding how badly Lordstown Motors has ventured into unsavory territory. But it adds some flavor to the stew Hindenburg is cooking in the hope that it can do some real damage to the share price (so it can short the stock) and maybe open a few eyes on how SPAC-backed tech firms (with no product) operate. It also appears to be working; Lordstown shares fell by 20 percent Friday morning.

The full report is extensive and has some incredibly damning evidence in relation to the pre-orders. There’s actually so much that your author has only been able to get through about half of the accompanying documentation that verifies Hindenburg’s claims. While all seem credible, the most unsettling was the litigation records that showed Burns paying consultants for every truck pre-order as early as 2016 while he was still CEO at Workhorse. Considering some of Lordstown’s largest buyers turned out to be small operations run out of apartments with no history of fleet management, it makes you wonder how much of that was going on.

Lordstown has yet to comment on the issue and will likely take a couple of days to prepare a response.

[Image: Lordstown Motors]

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28 Comments on “Hindenburg Research Report Lambasts Lordstown Motors, Fabricated Orders...”


  • avatar
    bullnuke

    Before commenting on Lordstown Motors, one might “research” Hindenburg Research – a well known short-seller.

    • 0 avatar
      Matt Posky

      We mention that the firm loves to short tech-focused SPACs with no product in both this and the Nikola piece.

      • 0 avatar
        28-Cars-Later

        Hindenburg buried MVIS for a while, I’d get out of Lordstown now and wait to see if it suffers a similar hit. Evidently in the trading world they are “hitmen” and somehow have the power to knock you down a peg. My guess is they do this to short then sell back when cheap (profiting on short) and then buy shares and calls to ride it back up.

        • 0 avatar
          bullnuke

          Agreed, 28. It’s is always wise to do one’s own research concerning an issue from several places when claims such as Hindenburg’s are made. There may be a miniscule portion of a kernel of truth in these claims that may be inflated to yield a desirable outcome for Hindenburg. Citron Research plays similar games. And Matt – my comment was by no means a poke at you or your article. I read what you said and added my $.02 to encourage your readers to go look further into it especially because it concerns EV’s, a usually contentious and sometime emotional issue on this site.

          • 0 avatar
            28-Cars-Later

            Sh*tron historically was one to play similar games but since the WSB thing I haven’t kept tabs on them so maybe they’ve toned it down? I was fortunate with Hindenburg, a senior trader explained they were bad news and I dumped my MVIS position slightly ahead and rebought later. I also did well on my calls but probably sold too soon, c’est la vie.

  • avatar
    SoCalMikester

    fabricated sales to make appear more appetizing.

    kinda word-salady

  • avatar
    SCE to AUX

    “the model is probably 3-4 years away from production”

    Uh-oh.

    That might be OK when you show a concept, but not when the world believes you’re 6 months from production.

  • avatar
    stuki

    Duh!

    What else would they be doing? If they had the competence to build anything useful, they would have done so.

    Besides, dunces on Fed welfare are the ones with all the money. Hence selling paper and empty promises to them, not something as hard as useful things to people who are simultaneously broke and literate hence demanding, is where it’s at, in financialized dystopias.

  • avatar
    Mike Beranek

    We’ve seen a lot of this type of business practice come to light in the last couple of years. For example, I read about a real estate developer who has committed bank fraud by inflating the value of his properties to banks, while at the same time committing tax fraud by deflating the value of his properties to the IRS.
    Just a façade, a veneer, a false mask. Don’t fall for it.

  • avatar
    wolfwagen

    Strike 1: That truck is Fugly. It looks like some fat-faced kid wearing orthodontic headgear, or some sort of bug that I would stomp on repeatedly.

    Strike2: Lordstown Motors name. Nope, I understand it is for the location, but nope, Nope, Nope.

    Strike 3: they are in the crosshairs of Hindenberg Research. Granted they are no saint, But when they are Exposing your shenanigans with even limited evidence all eyes are on you, not your accuser.

    • 0 avatar
      Peter Gazis

      Strike 1: Lordstown Test Mule catches Fire.
      Strike 2: Lordstown’s sister company, Workbench, doesn’t get contract for postal vehicles
      Strike 3: Orderbook filled with fake orders.

      Looks like GM is going to get its factory back. Just in time to build the new Equinox.

      • 0 avatar
        Peter Gazis

        Correction: Workhorse is Lordstown Motor’s sister company.

      • 0 avatar
        28-Cars-Later

        Some points:

        -GM doesn’t want Lordstown back, I really hope you don’t think it does.

        -The company who lost the USPS contract was Workhorse Group Inc., not “Workbench”.

        -Teslas still catch fire on occasion, but that’s ok of course since they are TBTF by this point.

        -I’d wait for more on these phantom orders before I declare Hindenburg is right. They are not too noble for a dump-n-pump once their vague claims are further elaborated.

        A year or two ago we deconstructed Tesla’s original $1000 refundable Model 3 deposit. When you look at production IIRC from 2018 through Q2 2019, the amount of Model 3s built (something in the neighborhood of 300,000) vs the claimed 1,000,000 or so deposits, you come out with a rough 30% of original pledged orders. This article from 2018 comes to a similar result of even lower conversion rate at the time:

        https://www.greencarreports.com/news/1117043_study-shows-23-percent-cancelations-on-tesla-model-3-deposits

        Now today can we tell if all deliveries were linked to the original pledge with public data? AFAIK we cannot, and surely some of those orders came after the model came up for regular sale so the deposit to production ratio is likely even lower. Did anyone call those deposits fake orders? Were they “fake” in the sense all anyone had to do legitimately was put $1,000 on a credit card, theoretically could be done through a shell company if Musk’s people wanted to pump up the numbers? Not sure what the whole story is with Lordstown but until more information is available I’d be loath to call these orders “fake” because about 70% or more of Tesla’s original Model 3 “orders” could be defined as vaporware as well. Reservations and orders do not always equal deliveries in any industry, but keep up the shilling.

        • 0 avatar
          ajla

          I “reserved” an Alpha Ace but it’s obviously the vaporiest Vaporware that’s ever vapored. I don’t even think an actual prototype even exists. Just some dudes screwing around in Photoshop.

          alphamotorinc.com/

  • avatar
    Imagefont

    I called out this Ponzi scheme the moment I heard the name and heard who was involved. They will NEVER introduce anything except excuses and delays. These criminals have been lining their pockets for years. Same bad actors over and over again. 100% fraud.

    • 0 avatar
      NormSV650

      The Ohio-based electric pickup truck manufacturer has entered its Endurance EV in the SCORE San Felipe 250 off-road race. The event will take place on Mexico’s Baja California Peninsula on April 17. Autoweek

      • 0 avatar
        Imagefont

        Norm
        Well two things: an entry of one pickup in a rally proves nothing. And second, April is a long way off. Their two main products are excuses and delays.

  • avatar
    Lichtronamo

    As existing manufactures get into EVs these start-ups will be ended quickly.

  • avatar
    ToolGuy

    https://youtu.be/9l7S1hnRPF0?t=3

  • avatar
    Land Ark

    Well, I’ll admit it, I bought Lordstown a few months ago. This really sucks for me personally. From what I’ve read so far most of what they are saying is true, but also that it is fairly standard practice for start up companies. So, it’s one of those times when the side telling the truth is an a-hole and the other side is also an a-hole.

    All in all though, it’s yet more proof that I have no business investing in stocks.

    • 0 avatar
      28-Cars-Later

      I almost bought the selloff after USPS, would not have been a bad trade through Friday’s close at least. I see a pennant on the daily chart, volume seems to be OK, and the sideways action is getting close to the Parabolic SAR. Prior to Hindenburg’s hit piece I’d say it had a real chance of breaking out (or breaking down) soon. Monday pre market will be telling… but I think the lesson is don’t hold through earnings or key catalysts. Buy the rumor and sell the news.

  • avatar
    Ol Shel

    An article on all of the proposed supercars announced every year, including who invests -and where the money actually disappears to- would be a fun read.

  • avatar
    ajla

    My Lordstown truck will look great parked between my Carbon E7 and Elio 3-Wheeler.

  • avatar
    dwford

    Hindenburg Research might seem shady at first glance, but isn’t this what short sellers are supposed to do: expose overvalued companies? Yes it is self serving, but if the details are correct and Lordstown Motors is another deceptive start up, shouldn’t investors be aware?

  • avatar

    Considering GM only sells 17,000 Bolts a year the 100,000 preorders for the Lordstown EV seems unrealistic. In five years most of GM’s EV will have bitten the dust.

    The US postal service really dodged a bullet by not purchasing a “vehicle” from workhorse.

  • avatar

    Considering GM only sells 17,000 Bolts a year the 100,000 preorders for the Lordstown EV seems unrealistic. In five years most of GM’s EV will have bitten the dust.

    The US postal service really dodged a bullet by not purchasing a “vehicle” from workhorse!

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