Report finds inaccurate claims against Endurance

LORDSTOWN — A special committee formed to investigate claims made against Lordstown Motors Corp. in a scathing short-sellers report found the claims mostly false and misleading, but substantiated issues regarding some inaccurate statements about preorders for the company’s electric truck.

The findings released Monday were in response to a March report by Hindenburg Research that characterized the startup as a mirage with no sellable product.

It claimed 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.

The report also questioned the viability of technology used in the electric truck, the Endurance.

And it was used as the foundation for several potential class-action lawsuits against the company.

“The special committee’s investigation concluded that the Hindenburg Report is, in significant respects, false and misleading,” the committee report states. “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 preorders.”

The committee’s release of its findings coincided with announcement that founder and CEO Steve Burns and Chief Financial Officer Julio Rodriguez resigned, but the company did not link the two announcements.

Comprised of Lordstown Motors board members David Hamamoto, Jane Reiss and Dale Spencer, to do the investigation, the committee engaged global law firm Sullivan & Cromwell, which was helped by technical experts by a “leading automotive consulting firm,” the report states.

Regarding preorders for the truck, the company has stated multiple times that its preorders were from or mostly from commercial fleets, but many preorders were obtained from fleet management companies and other end-users that indicated in interest in purchasing trucks and “so-called ‘influencers’ or other potential strategic partners that committed to attempt to secure preorders from other entities, but did not intend to purchase Endurance trucks directly,” the report states.

Also, “one entity that provided a large number of preorders does not appear to have the resources to complete large purchases of trucks” and “other entities provided commitments that appear too vague or infirm to be appropriately included in the total number of preorders disclosed.”

The committee report states Lordstown Motors repeatedly disclosed the preorders were non-binding and stated the risk that preorders may not be converted to actual orders.

Also, in most instances, the company did not require a reservation or similar payment, however, orders submitted through the website required a $100 refundable deposit. In addition, a company hired to procure preorder secured about 1,000 and also helped Lordstown Motors develop a relationship with a fleet management company, the report states.

“Lordstown Motors has obtained tens of thousands of preorders from fleets, fleet management companies, or other end users. If converted to orders, this demand will comprise substantially all of the company’s expected production volume through 2022,” the report states.

The committee’s findings also challenge the Hindenburg Report’s claims on the 2021 production state date, the viability of the hub motor technology and on a prototype of an Endurance that caught fire in January.

Lordstown Motors has sourced battery cells from suppliers and has received and is installing initial battery pack assembly equipment, the report states.

Also, the company expects to manually produce the hub motors while the motor production line is installed over the next few months. The technology behind the motors, the committee believes is viable despite motors of this sort not previously commercialized at scale in the light vehicle market.

“The special committee concluded that while various factors could lead to delays in the start of production, the projected September 2021 start of production remains achievable with the expectation of delivery to customers in the first quarter of 2022,” the report states.

The prototype fire on Jan. 13 during the truck’s first test drive “was an isolated event rather than one reflecting a systemic problem,” the report states.

At fault were “non-conforming parts” on a battery pack that had been manually reworked for assembly of the prototype. When the driver accelerated beyond the test parameter for speed, the faulty connection overloaded and the battery caught fire, the report states.

“Lordstown Motors reported the incident to the relevant regulator and has taken steps to address the isolated issues that contributed to this incident. The production process now in place and t

are intended to ensure that this type of issue does not recur,” the report




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