Stephen Burns, the founder and former CEO of electric-vehicle manufacturer Lordstown Motors (NASDAQ: RIDE) sold the rest of his stake in the company according to a recent regulatory filing. Burns sold his remaining stake in the company in three separate transactions, occurring between May and June. 581,000 shares were sold before the company’s reverse stock split in May and 791,000 shares were sold after the split. In May, the company executed a reverse stock split to meet NASDAQ’s $1 listing requirement and to appease concerned investor Foxconn.
Lordstown Motors is an electric vehicle (EV) manufacturer based in the United States. The company specializes in producing electric pickup trucks and aims to cater to the commercial fleet market. Lordstown Motors generates revenue by selling its flagship model, the Endurance pickup truck, which is designed to provide a sustainable and cost-effective transportation solution for businesses. The company was founded in 2019 and emerged from a merger with DiamondPeak Holdings Corp., a special purpose acquisition company (SPAC). Lordstown Motors gained attention for repurposing an automotive manufacturing plant in Ohio, previously operated by General Motors, to establish its production facility. However, the company has faced various challenges, including financial struggles, production setbacks, and leadership changes, which have raised concerns about its ability to deliver on its ambitious goals in the competitive electric vehicle market.
Lordstown Motors recently announced its intention to take legal action against Foxconn, a prominent Taiwanese electronics manufacturing company and investor. The legal action is aimed at ensuring the completion of Foxconn's proposed purchase of approximately 10% of Lordstown Motors' shares. This development is critical for Lordstown Motors as the company grapples with limited access to capital, a crucial resource for the financially strained organization.
The deal with Foxconn holds significant importance as it has the potential to determine the fate of Lordstown Motors. The company has expressed concerns about the viability of a $170 million investment agreement with Foxconn, which has led to uncertainties about the company's financial stability. Failure to proceed with the investment deal, as the company fears, may have severe consequences, potentially resulting in the discontinuation of manufacturing operations for Lordstown Motors' flagship model, the Endurance pickup truck, which is integral to their product lineup.
These issues, while massive, are no stranger to the electric vehicle manufacturer, who has had its fair share of controversy in the past few years. In 2021, CEO Steven Burns and CFO Julio Rodriguez resigned over research from Hindenburg Research, a notorious forensic financial research firm. According to Hindenburg Research, a report alleged that Lordstown Motors exaggerated the quality of pre-orders for their electric trucks. The research firm further accused Lordstown Motors of inflating the feasibility of their technology and providing misleading information to investors regarding their production plans. This announcement caused a subsequent 20% fall in shares prices, as investors questioned the integrity of the company and its financials.
Looking at Lordstown Motors’ recent 10-K, the financials look even more grim. Lordstown Motors currently holds around $121 million in cash and cash equivalents, over a 50% decrease from last year when they held around $244 million in cash and cash equivalents. On top of that, the company is currently bleeding cash, losing around $282.4 million in cash flows from operating activities. While this is an improvement from a $410.3 million dollar loss in cash flows from operating activities last year, it is still a ginormous figure compared to the cash and cash equivalents that they have on hand, leading to further concerns from investors about the financial stability and health of the company.
Due to these recent events, Lordstown Motors has fallen out of favor with a lot of large financial institutions and asset managers, with many cutting their positions. Specifically, D.E. Shaw & Co. cut shares held by nearly 61%, and large asset manager Invesco cut shares held by 96.5%. Other large financial institutions and asset managers that have cut shares held recently include Blackrock, Susquehanna International Group (SIG), and Citadel. You can check out all of Lordstown Motors’ recent institutional holdings data with Quiver Quantitative.
Additionally, insiders have been cutting shares as well. Since the end of 2021, Lordstown Motors insiders have dumped over 20,000,000 million shares, an enormous amount that shows a lack of confidence from management about future business outlooks and prospects. You can check out all of Lordstown Motors’ recent insider trading data with Quiver Quantitative's Insider Trading Data
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