Image source: Lordstown Motors
Startup electric truck maker Lordstown Motors Corporation (Nasdaq: Chart RIDE - $0.64 0.0286 (4.251%) ) has confirmed that a federal probe is underway into its merger with special purpose acquisition company (SPAC) DiamondPeak Holdings Corporation.
At specific issue is Lordstown's reporting of vehicle pre-orders.
The Ohio-based company disclosed in an amended prospectus filing that it had been informed by the U.S. Attorney’s Office for the Southern District of New York of its investigation, which follows one initiated by the U.S. Securities and Exchange Commission earlier this year.
The federal investigation follows several difficult months for the 3-year-old company as it tries to launch its first model, an all-electric pickup truck called the Endurance, in September.
In March, noted short seller Hindenburg Research made a splash with a report that accused Lordstown executives of misleading consumers and investors about receiving more than 100,000 pre-orders worth $1.4 billion for the Endurance.
The report alleged that Lordstown had overstated preorders and its overall financial health in an effort to raise capital.
The report prompted the SEC to launch an inquiry into Lordstown and comments by made key executives.
An internal investigation later confirmed the report findings, and chief executive officer Steve Burns, along with chief financial officer Julio Rodriguez resigned in June.
In its most recent financial report, the Form 10-Q for the March 2021 quarter, Lordstown revealed it was struggling with cash flow and had “substantial doubt” it could continue operating over the next 12 months.
The company, nonetheless, is not moving back its targeted start of production and hopes to raise more capital, potentially through asset-backed financing or a government loan program, according to The Wall Street Journal.
In a statement on Friday, Lordstown said it is “committed to cooperating with any regulatory or governmental investigations and inquiries.”
The start-up also said, “We look forward to closing this chapter so that our new leadership — and entire dedicated team — can focus solely on producing the first and best full-size all-electric pickup truck, the Lordstown Endurance.”
Lordstown raised $675 million in its merger last fall in a deal that valued the company at $1.6 billion.
A number of other newly-public EV startups, including Nikola Corporation and Canoo, are also facing stepped up scrutiny from the SEC and other regulators.
In April, the SEC said it would start reviewing filings and seeking clearer disclosures for SPACs to ensure investors were not being misled. The agency’s announcement followed a dramatic increase in the use and popularity of SPACs over the past six months.
Source: Equities News