US Justice Department begins probe of Lordstown Motors, report says

LORDSTOWN — The U.S. Justice Department has opened a probe into troubled electric vehicle startup Lordstown Motors Corp., according to published reports Friday.

On the heels of the Wall Street Journal report, shares of Lordstown Motors stock fell 15 percent to $8.80 per share and trading in the stock was halted briefly, according to The Motley Fool. Trading resumed shortly before noon and when the day closed, the stock was down 11 percent to close at $9.23 per share.

The stock is down nearly 55 percent from the start of the year.

The Wall Street Journal reported the inquiry, being handled by the U.S. attorney’s office in Manhattan, is in its early stages. The publication cites people familiar with the matter in the story.

A spokesman for the company said Lordstown Motors is committed to cooperating with any regulatory or governmental investigations or inquires and looks forward, with its new executive team, to the start of manufacturing its first offering, the battery-powered Endurance truck.

A message seeking comment was left with the U.S. Attorney’s office in the southern district of New York, which includes Manhattan.

Lordstown Motors also is being looked at by the U.S. Securities and Exchange Commission, the company disclosed in March. It was February when the regulatory agency first asked for documents related to it becoming a publicly traded company in October and preorders for the truck. The SEC has issued two subpeonas to the company.

The company has said it is cooperating with the SEC.

The DOJ inquiry is the latest trouble for the company that in recent months has found itself the subject of a scathing short-sellers report, multiple lawsuits and questions over whether it can stay in business.

In March, New York City-based Hindenburg Research released a biting short-sellers report that alleged Lordstown Motors misled its investors regarding preorders and production schedule for its battery-powered truck. The report also characterized the company as a mirage.

A special committee of company officials was formed to investigate the claims made in the report. The committee responded in June, reporting it found the claims in the report mostly false and misleading, but substantiated issues regarding some inaccurate statements about preorders for the company’s electric truck.

The same day the report was released, Lordstown Motors announced founder and CEO, Steve Burns, and Julio Rodriguez, chief financial officer, resigned. The two walked away with severance packages of $750,000 and $200,000.

No reason was given for their departures.

The report spawned several lawsuits against the company.

In May, the company was late paying its property tax bill to Trumbull County. It ended up paying the $570,958 it owned plus $57,095 it was fined for non-payment.

In regulatory reports last month, the company stated it didn’t have enough money to launch commercial scale production of the Endurance and disclosed its doubt to remain a “going concern,” an accounting term that means a company has the financial wherewithal to meet its obligations.

It felt more scrutiny in June with reports that several top executives sold millions in stock weeks before announced financial results in March. The special committee determined, the transactions, made by five executives, “were made for reasons unrelated to the performance of the company or viability of the Endurance.”

It also found itself walking back statements that it had firm, binding orders. Company President Rich Schmidt on June 15 said during a meeting of the Automotive Press Association of Detroit that Lordstown Motors was on track to begin making the Endurance in the fall and had enough binding orders to keep going through 2022. The next day, the company said statements were not accurate.

Interim CEO Angela Strand has said the company is seeking additional money to scale capacity and further automate the manufacturing processes as it ramps toward its limited production launch in September. The company, she said, is evaluating multiple funding sources and continues its due diligence work on a federal loan program designed to help automakers manufacture more efficient vehicles.



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