Hindenburg Research Report Lambasts Lordstown Motors, Fabricated Orders

Matt Posky
by Matt Posky

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]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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2 of 28 comments
  • Akear Akear on Mar 13, 2021

    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.

  • Akear Akear on Mar 13, 2021

    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!

  • Calrson Fan Jeff - Agree with what you said. I think currently an EV pick-up could work in a commercial/fleet application. As someone on this site stated, w/current tech. battery vehicles just do not scale well. EBFlex - No one wanted to hate the Cyber Truck more than me but I can't ignore all the new technology and innovative thinking that went into it. There is a lot I like about it. GM, Ford & Ram should incorporate some it's design cues into their ICE trucks.
  • Michael S6 Very confusing if the move is permanent or temporary.
  • Jrhurren Worked in Detroit 18 years, live 20 minutes away. Ren Cen is a gem, but a very terrible design inside. I’m surprised GM stuck it out as long as they did there.
  • Carson D I thought that this was going to be a comparison of BFGoodrich's different truck tires.
  • Tassos Jong-iL North Korea is saving pokemon cards and amibos to buy GM in 10 years, we hope.