Burn and Crash of a EV Giant 💩

Burn and Crash of a EV Giant 💩

What happened — a hot electric vehicle company, Lordstown Motors, which IPO'd amidst EV craze gripping most of 2020, is now telling investors it may not survive until the first sunrise of 2022, as it significantly “overestimated” its tech prowess and cash position.

Several early stage EV companies were trying to catch the post-COVID electric craze, pitching themselves as the Tesla 2.0, building up expectations, doing successful market listings and raising big money from investors. But then, under scrutiny, the picture really isn’t that pretty.

The blow up — specifically in this case, a short seller report by a research firm called Hindenburg claimed Lordstown Motors’ management straight up lied about pre-orders, had no actual commitments, and intermittently used fake info to pitch investors for money. You can read the full report here.

The report brought the house of cards crashing:

  • Lordstown was forced to clarify it doesn’t have the cash to “actually” produce its first concept vehicle — a much hyped truck called the Endurance
  • Lordstown CEO and CFO quit over mismanagement last week
  • Stock gets hammered 20%
  • SEC, the market regulator, opens an investigation this week

Going forward — Lordstown still claims it can meet its production target by the end of September, but that’s likely a way of giving markets the impression that “all is still under control” and to stop employees from jumping ship.

Big picture — the entire episode, along with the erstwhile blowup of Nikola Motors (a Tesla clone) is a sign of times to come — where EV stocks around the world will come under immense pressure to deliver against lofty promises going forward.

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