Shares of Lordstown Motors (RIDE) are under pressure on Monday after the electric truck maker said its CEO Steve Burns and CFO Julio Rodriguez have resigned, effectively immediate. This comes only days after the company warned that it had "substantial doubt" about its ability to continue as a going concern in the next year. Following the news, R.F. Lafferty analyst Jaime Perez downgraded Lordstown to Sell on increasing "uncertainty in the future."
CEO, CFO STEP DOWN: Lordstown Motors announced several changes to its executive management team as the company begins to transition from the R&D and early production phase to the commercial production phase of its business. To that end, Lordstown Motors Lead Independent Director Angela Strand has been appointed Executive Chairwoman of the company, and will oversee the organization's transition until a permanent CEO is identified, and Becky Roof, will serve as Interim Chief Financial Officer. Steve Burns has resigned as Chief Executive Officer and from the Company's Board of Directors, and Chief Financial Officer Julio Rodriguez has also resigned. All changes are effective immediately and the company has engaged an executive search firm to identify a permanent CEO and CFO. Rich Schmidt, President of Lordstown Motors, will continue to oversee all day-to-day operations, including manufacturing and engineering. Jane Ritson-Parsons, formerly Lordstown Motors Interim Chief Brand Officer, has been appointed Chief Operating Officer. Tom Canepa, General Counsel, Shane Brown, Chief Production Officer, Darren Post, Vice President of Engineering, John Vo, Vice President of Propulsion, will all remain in their current roles to continue to guide the company's progress.
SPECIAL COMMITTEE INVESTIGATION: Lordstown Motors also said it has received a statement regarding the results of the investigation conducted by the Special Committee of its Board of Directors into the report published by Hindenburg Research on March 12, 2021. The Hindenburg Report stated, among other things, that Lordstown Motors had made various misstatements about demand for its Endurance pick-up truck, the viability of the technology utilized in the Endurance, and its ability to start production of the Endurance in September 2021. The Special Committee's investigation concluded that the Hindenburg Report is, "in significant respects, false and misleading. In particular, its challenges to the viability of Lordstown Motors' technology and timeline to start of production are not accurate." The investigation did, however, identify issues regarding the accuracy of certain statements regarding the company's pre-orders.
Lordstown Motors "made periodic disclosures regarding pre-orders which were, in certain respects, inaccurate," the company said in a statement following the results of an investigation conducted by the Special Committee of its Board of Directors into the report published by Hindenburg Research on March 12. "Lordstown Motors has stated on several occasions that its pre-orders were from, or 'primarily' from commercial fleets. In fact, many pre-orders were obtained from fleet management companies or other end users that indicated interest in purchasing Endurance trucks, similar to commercial fleets, and so-called 'influencers' or other potential strategic partners that committed to attempt to secure pre-orders from other entities, but did not intend to purchase Endurance trucks directly. One entity that provided a large number of pre-orders does not appear to have the resources to complete large purchases of trucks. Other entities provided commitments that appear too vague or infirm to be appropriately included in the total number of pre-orders disclosed," it explained.
SELL LORDSTOWN: R.F. Lafferty analyst Jaime Perez downgraded Lordstown Motors to Sell from Hold with a price target of $3, down from $9, after the company announced that CEO Steve Burns and CFO Julio Rodriguez resigned their positions, effective immediately. Last week, Lordstown warned of a going concern risk and during its first quarter earnings call, management warned that it might need to raise additional capital to meet its production forecast, Perez noted. "With the level of uncertainty increasing in the future" of the company, the analyst believes a downgrade to Sell is prudent.
WHAT'S NOTABLE: Lordstown Motors shares rallied to positive territory on Wednesday afternoon after the electric truck maker said it was in talks with multiple parties to raise funds, a disclosure that came a day after Lordstown warned that there was "substantial doubt" about its ability to continue as a going concern in the next year due to problems in funding production of its vehicle, Reuters' Ben Klayman and Chris Prentice reported. In a statement, the company said it has "adequate capital to continue operations, meet supplier obligations and begin limited production," but will need to raise additional funds and was in talks to do that. "We are debt free, have significant tangible assets and multiple viable avenues to raise capital including asset-backed financing, equity, equity-related or debt financing, loans, as well as potential strategic investments over the longer term," the company added. "We are already in active conversations with multiple parties to do so."
PRICE ACTION: In Monday morning trading, shares of Lordstown have dropped almost 20% to $9.19.
Lordstown Motors
-2.35 (-20.61%)