Lordstown stock collapses after electric truck company warns of financial situation

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The shares of Lordstown Motors Corp. fell more than 16% on Tuesday night after the electric vehicle company warned investors of its ability to continue operating financially.

In the delayed quarterly and annual filings with the Securities and Exchange Commission that were made public on Tuesday, Lordstown RIDE,
+ 4.90%
added a “going concern” warning, which advises investors that it may not be able to continue trading due to financial conditions.

“The company’s ability to continue operating depends on its ability to complete the development of its electric vehicles, obtain regulatory approval, begin commercial scale production and initiate the sale of these vehicles. The company believes that its current level of cash and cash equivalents is not sufficient to finance the production on a commercial scale and the start of the sale of such vehicles ”, indicates the file. “These conditions raise substantial doubt as to our ability to continue to operate for a period of at least one year from the date of issuance of these unaudited condensed consolidated financial statements.”

Lordstown shares were trading near their daily high of $ 15.80 when deposits were released on Tuesday, then plunged to $ 10.30 before closing with a 16.3% decline at $ 11.22 . However, the shares fell again in after-hours trading, once again trading below $ 10.50 per share.

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Lordstown executives raised concerns about their financial situation in the electric vehicle company’s latest earnings report. The company, which was planning to introduce an electric pickup called Endurance, revealed in May that production under current financial conditions “will be limited and at best represent 50% of our earlier expectations.”

Also on Tuesday, RBC Capital analyst Joseph Spak began hedging Lordstown shares with the equivalent of a sell note.

While there are “clear positives” for Lordstown, the fleet pickup truck market it targets is “ultimately small and fiercely competitive,” Spak said.

“Our forecast is well below management’s goals and consensus and anticipates significant capital increases if necessary,” said Spak. The stock “will be volatile and trade based on sentiment, production milestones, orders and partnerships,” and there is a possible downside to RBC’s $ 5 price target, which is roughly $ 55. % decrease compared to Tuesday prices.

Lordstown went public in October through a reverse merger with a specialist acquisition company, or SPAC, which raised nearly $ 700 million. This route to government procurement has been popular for companies looking to make electric vehicles, such as the potential Tesla Inc. TSLA,
+ 0.33%
competitors are looking to raise enough money to produce electric vehicles, an expensive task.

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Since going public, Lordstown has struggled. Short seller Hindenburg Research published a report on the electric truck maker earlier this year, accusing it of misleading investors and being a “mirage.” Established automakers have also made strides in introducing electric pickup trucks, most notably Ford Motor Co. F,
+1.12%,
which recently unveiled an electric F-150.

Claudia Assis à San Francisco contributed to this report


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