Lordstown Motors, an electric car startup, said on Tuesday that it did not have enough funds to start commercial production and risked corporate failure, causing its stock price to plummet.
The company revised its annual report to the US Securities and Exchange Commission on Tuesday, saying it may no longer have a “continuing operation” function in a year.
The company said that as of the end of the first quarter, its current cash and cash equivalents were $587 million, so it did not have enough funds to launch Endurance, an electric pickup truck for commercial operators.
The company stated in the document: “These circumstances have created serious doubts about our ability to continue operations.”
Lordstown stated that it is trying to find more funding, but there is no guarantee that it will succeed. Its stock price plunged 16% to close at $11.22 and continued to fall in after-hours trading.
The company has been in trouble since it was accused by a short seller of inflating orders earlier this year, and the company denied it.
Lordstown Motors first attracted attention in 2019 when it took over a former General Motors factory and promised to hire 400 workers to make electric cars there. After General Motors closed its plant in Ohio, President Donald Trump lashed out at the company, which is an important political state in the Midwest.
General Motors borrowed US$40 million from Lordstown Motor Company for the purchase and invested US$75 million in the company.
The bid to acquire the factory originally came from the Workhorse Group, which was run by Steve Burns, the current chief executive of Lordstown. Auditor of Workhorse Ask a question Whether it can continue to operate as a going concern in 2018. Another electric vehicle startup, Workhorse Group, licenses the technology to Lordstown and owns 10% of its shares.
The short seller Hindenburg Research Center published a report in March accusing Lordstown of Inflated its order book, Which triggered an investigation by the US Securities and Exchange Commission. Lordstown denied inflating bookings.
But in May, executives of the Ohio company stated that they would cut Endurance’s production and seek additional funding, prompting its share price to fall.
The company revealed more details about the regulatory investigation on Tuesday, saying it has received two subpoenas from the US Securities and Exchange Commission. One is related to pre-orders, and the other is related to the merger with the special purpose acquisition company DiamondPeak Holdings in August 2020.
Lordstown also stated in its filing on Tuesday that it had discovered “significant flaws” in the process of disclosing information to investors. It stated that it does not have enough personnel with “appropriate technical accounting skills” to supervise financial reports or effective procedures for assessing the risk of material misstatement.
The document stated that the company is hiring more employees to solve the problem, but “cannot guarantee that we will successfully repair major defects.”
At the end of the first quarter, the company reported a cumulative loss of US$260 million and a quarterly net loss of US$125 million.