Lordstown Motors Has Been Faking Orders, Is Actually 3-4 Years From Production: Research Firm

[MReda]

Definitely a "guilty until proven innocent" mentality here...

Lordstown put out a press release re-affirming their delivery intent for September, and plans to discuss more about their production readiness at their earning's call on Wednesday:
https://investor.lordstownmotors.co...ssues-statement-regarding-short-seller-report

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[DuckTruck]

Short sellers with an agenda.

They were right about Nikola, and do raise some valid points, but this smells more than a little like an attempt to manipulate the stock price.

I will be going to a preview of the Endurance next Thursday. If photos are allowed, I'll post some.

In any case, I'll give my impressions of the event.

DucRider,

I'm looking forward to getting your take on the Endurance, as well as pictures, if possible. The promotional pieces and stories I've seen for quite some time have been very compelling. That said, with the allegations raised by the short-sellers of Lordstown's stock in the aftermath of the fire that destroyed one of their prototypes, I set out to find out more about the company.

I've been pouring over the internet this weekend to find all I can about Lordstown, Workhorse, and Hindenburg Research. When Hindenburg first went public with their concerns about Nikola last year, my first reaction was that of suspicion about a firm in a short position trying to drive the stock down. I wanted to believe Nikola's story. It felt promising, at least early on.

I thought Hindenburg was very up front about their short position in Nikola. In researching Hindenburg's report, it seemed that many of their allegations were well substantiated. Their exposé wreaked havoc on Nikola and their stock dropped from a high above $50 around the time of the report, to ~$17 today, along with turnover in their leadership. That stock drop needs to be compared against the run up in the broader markets, with all of the major indices hitting many new highs since then. Put simply, Hindenburg pulled back the curtain and many did not like what they saw.

With all of the recent news about shorting stocks, thanks in large part to GameStop and Reddit, it caught my attention when the Hindenburg name popped up again. After diving into many of the Lordstown stories found online, some including interviews with company personnel, I feel a similar sense that Hindenburg is bringing forth credible, concerning points. The stories and interviews relating to many aspects of those non-binding orders are particularly troubling to me.

I would encourage anyone interested in Lordstown's vehicles or stock to do a deep dive into their history. I want to see many new players in the future of EVs and hope that Lordstown becomes one of those success stories. I would love the tale of renewal and growth for the city of Lordstown to mimic that of Rivian and Normal.

In short, I hope I'm wrong. Eyes opened, fingers crossed...

 

[DucRider]

DucRider,

I'm looking forward to getting your take on the Endurance, as well as pictures, if possible. The promotional pieces and stories I've seen for quite some time have been very compelling. That said, with the allegations raised by the short-sellers of Lordstown's stock in the aftermath of the fire that destroyed one of their prototypes, I set out to find out more about the company.

I've been pouring over the internet this weekend to find all I can about Lordstown, Workhorse, and Hindenburg Research. When Hindenburg first went public with their concerns about Nikola last year, my first reaction was that of suspicion about a firm in a short position trying to drive the stock down. I wanted to believe the Nikola story. It felt promising, at least early on.

I thought Hindenburg was very up front about their short position in Nikola. In researching that story, it seemed that many of their allegations were well substantiated. Their exposé wreaked havoc, and Nikola's stock dropped from a high above $50 around the time of the report, to ~$17 today, along with turnover in their leadership. That stock drop needs to be compared against the run up in the broader markets, with all of the major indices hitting many new highs since then. Put simply, Hindenburg peeled back the curtain and many did not like what they saw.

With all of the recent news about shorting stocks, thanks in large part to GameStop and Reddit, it caught my attention when the Hindenburg name popped up again. After diving into many of the Lordstown stories found online, some including interviews with company personnel, I feel a similar sense that Hindenburg is bringing forth credible, concerning points. The stories and interviews relating to many aspects of those non-binding orders are particularly troubling to me.

I would encourage anyone interested in Lordstown's vehicles or stock to do a deep dive into their history. I want to see many new players in the future of EVs and hope that Lordstown becomes one of those success stories. I would love the tale of renewal and growth for the city of Lordstown to mimic that of Rivian and Normal.

In short, I hope I'm wrong. Eyes open, fingers crossed...

I think Lordstown most definitely has issues, but not nearly to the degree of Nikola. Many of the allegations actually concern Workhorse, and the issues there have followed Steve Burns to Lordstown. The companies are technically separate, but there is overlap (technology license and 1% royalties - both sales and funding raised - to Workhorse, Workhorse owns 10% of Lordstown, etc.)

I have stock in more than a couple of EV related companies. Lordstown is not one of them.

They have a factory and are much closer to production than Nikola ever had a glimmer of a hint of hope of achieving.
I think most people completely dismissed the no deposit "reservations/orders" long before Hindenburg. In the same way, I place less weight on the number of $100 Cybertruck reservations than the $1K Rivian deposit, and less weight on those than the that of the Tesla Roadster Founders Edition. The conversion to actual sales has a definite correlation to deposit size.

I hope Lordstown is able to find their way and succeed in electrifying a segment that is currently without many (any?) options. I have some doubts about some of their choices (hub motors in particular), but maybe they can make it work for their target audience. If they don't get traction right away, they will be steamrolled by the electric F150. There is a good chance they will be anyway.

In any case, it will be interesting to hear the pitch and look at the truck.

 

[MReda]

I think Lordstown most definitely has issues, but not nearly to the degree of Nikola. Many of the allegations actually concern Workhorse, and the issues there have followed Steve Burns to Lordstown. The companies are technically separate, but there is overlap (technology license and 1% royalties - both sales and funding raised - to Workhorse, Workhorse owns 10% of Lordstown, etc.)

I have stock in more than a couple of EV related companies. Lordstown is not one of them.

They have a factory and are much closer to production than Nikola ever had a glimmer of a hint of hope of achieving.
I think most people completely dismissed the no deposit "reservations/orders" long before Hindenburg. In the same way, I place less weight on the number of $100 Cybertruck reservations than the $1K Rivian deposit, and less weight on those than the that of the Tesla Roadster Founders Edition. The conversion to actual sales has a definite correlation to deposit size.

I hope Lordstown is able to find their way and succeed in electrifying a segment that is currently without many (any?) options. I have some doubts about some of their choices (hub motors in particular), but maybe they can make it work for their target audience. If they don't get traction right away, they will be steamrolled by the electric F150. There is a good chance they will be anyway.

In any case, it will be interesting to hear the pitch and look at the truck.

I was thinking of a response, and you did a good job of wording it, so I'll add my agreement to your statement. I also have no stake in Lordstown, but I've been reading stories like this for decades and the pattern is always the same. Regardless of what happens next, Hindenburg has made their millions.

 

[DuckTruck]

First, let me say that I'm glad to hear that everyone appears to be doing solid due diligence with respect to this company. I'll reiterate my hope that Lordstown finds its footing and becomes a staple and a leader within the EV market for decades to come. They have targeted an unserved niche that would be ideal for EV application, not unlike Rivian in targeting their very specific markets. If they succeed, the City of Lordstown, the Mahoning Valley, and the State of Ohio all come out as big winners. So will the employees and the company's many fleet customers. At that time, loyal investors will also be rewarded, while Hindenburg will have crashed in a ball of flames. Metaphorically, this time. They made their bet, and they will live or die by the outcome.

I've never been a fan of shorting stocks, but I get how it works. You bet on a team that you think is going down. I dont like betting on someone to lose, or even betting on the spread. I get it, but I prefer to bet that my team is going to beat your team. Straight up.

In this case study, several things sound odd, especially the differing treatment of these orders we keep reading about. It doesn't appear we've heard one prospective client yet state that they're a "Yes". In fact, while we'll hear the company's formal response soon, some listed order-holders reportedly indicated they have little or no knowledge of any commitment made, or interest shown by their company with respect to the Endurance. Lordstown will hopefully shed much light on this and other issues later this week.

I understand that Lordstown says these letters of intent are considered only a gauge on interest in the Endurance, but this seems murky as they're also referred to as "orders" in some of their corporate statements and interviews. When I read the details of how these orders are being procured, and by whom, it didn't give me confidence that there is yet any real, demonstrated demand for the Endurance.

Since these allegations were issued, some have said it seems like a hit piece, or that Hindenburg may not have been up front about their short position. Some reporters may have failed to mention Hindenburg's disclosure, but I think their firm was clear about it from the get-go and stated that up front. The failure for them to disclose their short position would be criminal. Regardless of their financial motives, their statements appear to be the product of due diligence. If the allegations are erroneous, I hope Lordstown wins big in the aftermath.

Did I read correctly that G.M. loaned Lordstown the entire purchase price of the factory and grounds? Was the equipment in the factory all left behind by G.M.? If either is true, it would be a huge leg up for any new pickup manufacturer to have a well-stocked production facility right out of the gate. As a potential investor, it would be helpful to know the financial terms of any loans regarding factory and equipment, if public disclosure is appropriate. If the equipment is from G.M, it may help to explain why the Endurance is so very similar to the Silverado in appearance, as mentioned in many articles and comments.

As others have pointed out, from a build standpoint, putting the wheels in the hubs does not seem to be the best idea. Any moving electrical part that is subjected to every little imperfection in the road surface and all of the elements down there, will take an unbelievable beating over time. Worse yet, every pothole or curbstrike suffered will cause significantly more wear/damage than having the motors elevated and attached to the suspended carriage of the vehicle.

I'm sure I've lost a great many people due to the length of this post. I truly hope I'm off-base with my concerns. I also hope the company provides clarity this week when addressing all of the issues raised by Hindenburg. Time will tell.

 

[MReda]

First, let me say that I'm glad to hear that everyone appears to be doing solid due diligence with respect to this company. I'll reiterate my hope that Lordstown finds its footing and becomes a staple and a leader within the EV market for decades to come. They have targeted an unserved niche that would be ideal for EV application, not unlike Rivian in targeting their very specific markets. If they succeed, the City of Lordstown, the Mahoning Valley, and the State of Ohio all come out as big winners. So will the employees and the company's many fleet customers. At that time, loyal investors will also be rewarded, while Hindenburg will have crashed in a ball of flames. Metaphorically, this time. They made their bet, and they will live or die by the outcome.

I've never been a fan of shorting stocks, but I get how it works. You bet on a team that you think is going down. I dont like betting on someone to lose, or even betting on the spread. I get it, but I prefer to bet that my team is going to beat your team. Straight up.

In this case study, several things sound odd, especially the differing treatment of these orders we keep reading about. It doesn't appear we've heard one prospective client yet state that they're a "Yes". In fact, while we'll hear the company's formal response soon, some listed order-holders reportedly indicated they have little or no knowledge of any commitment made, or interest shown by their company with respect to the Endurance. Lordstown will hopefully shed much light on this and other issues later this week.

I understand that Lordstown says these letters of intent are considered only a gauge on interest in the Endurance, but this seems murky as they're also referred to as "orders" in some of their corporate statements and interviews. When I read the details of how these orders are being procured, and by whom, it didn't give me confidence that there is yet any real, demonstrated demand for the Endurance.

Since these allegations were issued, some have said it seems like a hit piece, or that Hindenburg may not have been up front about their short position. Some reporters may have failed to mention Hindenburg's disclosure, but I think their firm was clear about it from the get-go and stated that up front. The failure for them to disclose their short position would be criminal. Regardless of their financial motives, their statements appear to be the product of due diligence. If the allegations are erroneous, I hope Lordstown wins big in the aftermath.

Did I read correctly that G.M. loaned Lordstown the entire purchase price of the factory and grounds? Was the equipment in the factory all left behind by G.M.? If either is true, it would be a huge leg up for any new pickup manufacturer to have a well-stocked production facility right out of the gate. As a potential investor, it would be helpful to know the financial terms of any loans regarding factory and equipment, if public disclosure is appropriate. If the equipment is from G.M, it may help to explain why the Endurance is so very similar to the Silverado in appearance, as mentioned in many articles and comments.

As others have pointed out, from a build standpoint, putting the wheels in the hubs does not seem to be the best idea. Any moving electrical part that is subjected to every little imperfection in the road surface and all of the elements down there, will take an unbelievable beating over time. Worse yet, every pothole or curbstrike suffered will cause significantly more wear/damage than having the motors elevated and attached to the suspended carriage of the vehicle.

I'm sure I've lost a great many people due to the length of this post. I truly hope I'm off-base with my concerns. I also hope the company provides clarity this week when addressing all of the issues raised by Hindenburg. Time will tell.

I appreciate where you're coming from, and everyone who is considering a purchase from Lordstown should share your concerns right now. I'm with you on preferring to bet on a team to win.

Hindenberg clearly disclosed their short position, there was no question about that when I read the report. I think a lot of people read the news articles that repeated the headline of the report and a few key points, and maybe that was the issue, as you said, but it is right in the intro to report, impossible to miss.

It seemed to me the orders question fell into two categories - flat out fraud with orders being assigned to companies that maybe didn't exist, and legitimate order interest that was non-binding. The first category is fraud, and if Lordstown fabricated businesses to generate orders, that's a problem. Maybe there is another explanation that Lordstown will provide, or simply refute the claims. The second category is, in my opinion, complete nonsense. Companies do not place multi-million dollar, cash up front, no out clause, guaranteed orders with startups that have no track record of delivering. I've reviewed the fine print on dozens of contracts placed with the small companies I've worked at (including 5+ years at a technology startup in the transportation industry, for whatever that is worth), and it's basic risk management.

As far as the factory goes, 3-4 years from production vs in a few months is a huge difference, and I guess that will answer itself soon. We'll either see some trucks running around soon, like we do with Rivian these days, or we won't.

Honestly, I think Lordstown's mistake was going public - this level of scrutiny is going to distract them from the real work they need to do.

 

[Gshenderson]

I'm sure I've lost a great many people due to the length of this post. I truly hope I'm off-base with my concerns. I also hope the company provides clarity this week when addressing all of the issues raised by Hindenburg. Time will tell.

I grew up about an hour south of Lordstown. God knows that area could use the jobs and industry, so I hope they pull out of this as well. That being said, I’d put money into beachfront property in Kansas before I’d buy Lordstown stock right now. Im not optimistic they survive this.

 

[SANZC02]

I appreciate where you're coming from, and everyone who is considering a purchase from Lordstown should share your concerns right now. I'm with you on preferring to bet on a team to win.

Hindenberg clearly disclosed their short position, there was no question about that when I read the report. I think a lot of people read the news articles that repeated the headline of the report and a few key points, and maybe that was the issue, as you said, but it is right in the intro to report, impossible to miss.

It seemed to me the orders question fell into two categories - flat out fraud with orders being assigned to companies that maybe didn't exist, and legitimate order interest that was non-binding. The first category is fraud, and if Lordstown fabricated businesses to generate orders, that's a problem. Maybe there is another explanation that Lordstown will provide, or simply refute the claims. The second category is, in my opinion, complete nonsense. Companies do not place multi-million dollar, cash up front, no out clause, guaranteed orders with startups that have no track record of delivering. I've reviewed the fine print on dozens of contracts placed with the small companies I've worked at (including 5+ years at a technology startup in the transportation industry, for whatever that is worth), and it's basic risk management.

As far as the factory goes, 3-4 years from production vs in a few months is a huge difference, and I guess that will answer itself soon. We'll either see some trucks running around soon, like we do with Rivian these days, or we won't.

Honestly, I think Lordstown's mistake was going public - this level of scrutiny is going to distract them from the real work they need to do.

The most troubling thing I read in the report was they were paying $20 then $50 dollars to people to secure a reservation. That in itself is a huge problem; think Wells Fargo Banking recently with their account scandal.

I also think that having a small or no deposit for a reservation is way less of a true indicator than a larger deposit. I almost think the 1K Rivian asks for was a little small, based on Tesla order conversions to reservations the Model 3 with the 1K deposit was running around 75% on a cheaper vehicle. I'm guessing the CT for Tesla will be much higher cancelation rate with only a 100 dollar deposit.

I hope a lot of this is overstated as there is nothing better for a free market than competition but there have been so many shady characters feeding on the SPACs it is extremely difficult to tell the contenders from the pretenders.

 

[Pherdnut]

I've been into EV stock. But even before this, I had some problems with Lordstown stock:

* Their original June launch date was obviously FOS. I'll be surprised if they make September. IMO, they just said June to elevate their positioning in the news cycle as one of the potential first lith-ion pickups.

* Why a minimum of 5 to get a preorder? I know they're fleet-focused but that's still sketchy. If I owned a business in need of a pickup fleet, I'd want to do a trial run with 1 for a few months.

* I've never seen them justify the hub motors. They just mention the efficiency, but nothing about how their motors will compensate for the unsprung shock of being in the wheels with no suspension between them and every bump and pothole in the road.

* My personal politics aside, having Pence at their unveil was a really bad move that probably alienated a lot of potential customers. It was a foolish business move.

IMO, this report is nowhere near as damning as Nikola's was but I wouldn't be shocked if they're more behind schedule than they've been saying or that they fudged their preorder numbers. I don't think this will sink them though. Their hub motors needing replacement every X number of miles will do that.

 

[Pherdnut]

Don't lie & Hindenburg won't have anything substantial to write...

Healthy caution is actually why I took a few weeks after Rivian's reveal to place my preorder. Too many EV hype companies that have come onto the scene. I still place Fisker in that category as well...

I'm a big fan of Lucid though, I really think they are the real deal.

Fisker's legit, IMO. For the Magna deal in particular. They're basically launching international right out of the gate because of that. Once they dropped their solid state stuff and focused on EVs they got a lot more interesting. I expect to see a lot of their SUVs in Chicago.

 

[CommodoreAmiga]

* I've never seen them justify the hub motors. They just mention the efficiency, but nothing about how their motors will compensate for the unsprung shock of being in the wheels with no suspension between them and every bump and pothole in the road.

unsprung weight is definitely the downside that I see. But Lordstown DID talk about the benefit of hub motors -- and it's specific for fleets.

With traditional inboard mounted motors, there is a spindle/hub and a CV shaft that connects the hub to the motor. This is a wear item. Shafts can break, but more frequently it's the CV boots that tear and then the grease gets out and the dirt gets in and CV joints get crunchy and fail. Maintenance on the front suspension ultimately takes a truck down for a few hours if you service in-house, and probably a day or more if you use a third party for service.

With hub-integrated motors, you have two benefits. One is that you eliminate the weakest link -- the CV shaft and joints. The second is that if you do need to service a hub/motor you can quickly remove the entire assembly and swap a spare in it's place. Downtime is minimal, and your technicians (in house or third party) and work to service the assembly while your truck is still out making money.

This provides minimal benefit to end consumers. But for fleets, this is a differentiator.

 

[Pherdnut]

unsprung weight is definitely the downside that I see. But Lordstown DID talk about the benefit of hub motors -- and it's specific for fleets.

With traditional inboard mounted motors, there is a spindle/hub and a CV shaft that connects the hub to the motor. This is a wear item. Shafts can break, but more frequently it's the CV boots that tear and then the grease gets out and the dirt gets in and CV joints get crunchy and fail. Maintenance on the front suspension ultimately takes a truck down for a few hours if you service in-house, and probably a day or more if you use a third party for service.

With hub-integrated motors, you have two benefits. One is that you eliminate the weakest link -- the CV shaft and joints. The second is that if you do need to service a hub/motor you can quickly remove the entire assembly and swap a spare in it's place. Downtime is minimal, and your technicians (in house or third party) and work to service the assembly while your truck is still out making money.

This provides minimal benefit to end consumers. But for fleets, this is a differentiator.

Okay, but if you're trashing your motors on every other pothole, that has to get expensive fast.

 

[CommodoreAmiga]

Okay, but if you're trashing your motors on every other pothole, that has to get expensive fast.

Why would you think the motors are getting trashed on "every other pothole"?

 

[DucRider]

I was able to make it to the Lordstown preview, and am having a hard time feeling anything other than ambivalent about both the event and their vehicle. They had a regional Sales Manager on hand (the only one with a business card), and a couple of what I would have mistaken for interns but were instead sales people (business development reps?).

Due to COVID, they booked a max of 8 attendees per session (ours had about 5). They did a presentation with a few videos and PowerPoint slides. Nothing new that wasn’t already out there.

The truck they brought was what they were calling an “Alpha” build (the reason I didn’t take many photos). I gauge it somewhere between the Rivian reveal prototypes (but less complete) and Long Way Up trucks (but less functional). One of the attendees was poking around underneath with a flashlight, but gave up when asked about the cooling loop/pump for the hub motors. They responded that while it would be on the production trucks, it wasn’t implemented on the Alpha build. The frunk also wasn’t functional and couldn’t be opened (filled with components like the LWU trucks). Center console was a mock up that couldn’t be opened.

(bed step for those interested)

(the hub motors do look cool)

They are claiming 109 kWh for the battery pack – but were confused about the concept of rated and useable capacity. They settled on useable as their answer. They didn’t appear to be sure about pack voltage. I got the impression they weren’t being coy, but didn’t really know the nominal voltage – when I suggested 108s with a nominal 400V vs 96s with a nominal 350V, I could tell that was out of their league. They were happy to proclaim that they would be using 21700 cells sourced from LG as that was in their comfort zone. In general, the presenter felt semi-comfortable repeating the specs from the slides, but much beyond that was questionable. The Regional Director was a bit more knowledgeable.

They have yet to decide on L2 charging speed, but are targeting being able to do 150 kW DCFC. One of the other attendees was from a charging network. She was the one asking about their charging specs and also asked who they were working with. The response was they were starting to talk with EVGo and a few others.

They have also yet to decide on a charge port location. While it was left front on the prototype, they are seriously considering moving it to the front (like the LEAF), but getting feedback about damage vulnerability. Also thinking about the rear for fleets that require back in. Also considering offering several location options when ordering.

A chunk of time was spent touting the hub motors, Showed durability testing videos and were proud of the fact that they could be serviced/replaced easily requiring only eight bolts to do so (no one brought up that would mostly be necessary due to damage from their location). They also claimed better response from the motors since they didn’t have to transfer power through a shaft to the wheel. When I asked what the weighed with the unsprung weight issue, they said “only” 78 lbs (but that is the motor itself with no cooling components, etc.).

They are still claiming they are going to be the first truck to market, and having the factory from GM gives them a competitive advantage. As does the 10% stake that GM holds and the technology license from Workhorse. They are very proud of the fact that their arrangement with GM allows them access to the “parts bin” and suppliers to source components for their trucks.

I suggested configuring the frunk like the Hummer (level load instead of reach over) and they actually said that was still possible and they would look into it. They have apparently gotten feedback on the software limited 80 mph and are will to adapt that upon request (higher or lower).

Will they be shipping in September? No (unless they do a few hand-built just to say they did). They are planning on building 46(?) “Beta” units soon for crash and validation testing. When I brought up them coming out for NDEW this fall, they thought they should have some Beta units by then to offer test drives.

Are they 3-4 years from production as claimed by Hindenburg? If it takes them that long they will never reach the production phase. I actually think that they could conceivably start very limited production by the end of this year, but with nowhere near the testing and validation that Rivian is doing.

I get the impression that any fleet that is serious about a real order could get the truck tweaked to their specs (within reason).

Is Hindenberg wrong in their report? Not completely. But I also think that people need to remember their agenda and motivation. In my opinion, Nikola deserved every bit of the hit piece. Lordstown not as much (but they do have definite issues).

The Endurance is not targeted to the consumer, but they will be happy to sell you one. For those of you that have CarPlay and a bed step as “must haves”, they Endurance will check those boxes.

 

[MReda]

I don't want to quote all that, but thanks for filling us in, @DucRider .

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