Lordstown Motors sued again
Court filing claims company value down $1B
LORDSTOWN — Wrongdoing and misleading public statements by officers and directors of Lordstown Motors Corp. have devastated the electric-truck startup’s credibility and caused it to lose more than $1 billion in value, according to the latest lawsuit filed against the company.
This action in federal court in Delaware alleges “substantial financial and reputational harm” resulted from the misconduct, which also opened up the company to “potentially hundreds of millions of dollars” in damages connected to four investor class-action lawsuits.
The action, a stockholder derivative complaint, was filed by shareholders Daniel J. and David M. Cohen on behalf of Lordstown Motors against its executives and former executives of New York-based DiamondPeak Holdings Corp., the special acquisition purpose company that merged with the automaker in October to make it a publicly traded company.
It names Lordstown Motors CEO and founder Steve Burns, President Rich Schmidt, Director of Stamping Michael Fabian and Chief Financial Officer Julio Rodriguez.
Also named as defendants are Lordstown Motors directors David T. Hamamoto, former DiamondPeak chairman, and CEO Keith A. Feldman, Jane Reiss, Dale G. Spencer, Michael D. Gates, Mickey W. Kowitz, Angela Strand Boydston and Martin J. Rucidlo.
In addition, former DiamondPeak directors Mark A. Walsh, Andrew C. Richardson, Steven R. Hash and Judith A. Hannaway were named in the lawsuit.
An email was sent Tuesday seeking comment on the lawsuit.
The lawsuit alleges they violated U.S. securities laws, breached their fiduciary duty and were enriched unjustly.
Their actions, according to the lawsuit, “irreparably damaged” Lordstown Motors’ corporate image and goodwill. As a result, the company “will suffer from what is known as the ‘lair’s discount,'” a term applied to stock of companies accused of misleading investors, the lawsuit states.
“The company stands to incur higher marginal costs of capital and debit because of the misconduct,” the lawsuit states.
It is the fifth lawsuit filed against the company since financial investment research firm Hindenburg Research released a damning short-sellers report on March 12 that characterized Lordstown Motors as a mirage with no sellable product.
The report claims the company misled investors regarding its production capability and preorders, that the more than 100,000 it touted for the truck are “largely fictitious” and “used as a prop” to raise operating capital and confer legitimacy.
After its release, the lawsuit states Lordstown Motors stock freefell 16 percent in one day, erasing $517 million in stockholder value.
When Burns, during the company’s first-ever earnings call on March 17, announced the company was the subject of a probe by the U.S. Securities and Exchange Commission — a review the commission initiated one full month prior — stock dropped another 13 percent, erasing $367 million in market value.
Burns the next day on television said the company had “never said we had orders” and admitted the company did not yet have a product, the lawsuit states.
He further stated the previously much-hyped preorders “did exactly what they were supposed to do — gauge interest,” the lawsuit states.
The stock fell again March 24 when Hindenburg released photos of a broken-down Endurance being loaded onto a trailer, erasing $213 million more in value, the lawsuit states.
On Tuesday, the stock closed at $8.84 per share, down 4.1 percent from Monday’s close.
In March, the company skipped paying its real estate taxes to Trumbull County. It has since paid the $570,958 it owed plus $57,095 more in a penalty for missing the March 5 deadline for 2020’s first-half taxes.
The company acquired the former General Motors assembly plant and 600 acres on Hallock Young and Ellsworth Bailey roads for $20 million in November 2019 from General Motors to make the battery-powered trucks.
It unveiled the first two beta prototypes of the truck on March 31, saying the milestone was a “testament to the hard work, skill and work ethic of the 500 Lordstown Motors associates.” Two weeks prior, the company said after the first test trucks were complete, it planned to make one per day over the next two months as it moved toward a September launch date.