Lawsuit Claims Lordstown Lied to Investors Regarding Demand for All-Electric Endurance Pickup

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A proposed class action claims Lordstown Motors Corporation investors were financially injured following reports that the company had grossly overstated prospects for its full size, all-electric pickup and a subsequent drop in stock.

According to the proposed securities case out of Ohio, Lordstown and its top executives repeatedly touted the purportedly growing demand for the Endurance vehicle during the lead-up to the electric vehicle startup’s merger with special purpose acquisition company DiamondPeak. What the defendants failed to disclose in a proxy statement and to the public, however, was that Lordstown had “fabricated” the number of Endurance pre-orders to give prospective investors “a false sense of confidence” and that, in reality, the Endurance faced “significant production hurdles” and had not been tested and validated to meet federal safety standards.

Per the case, Lordstown investors suffered financial damages when the price of the company’s stock plummeted following the publication of Hindenburg Research’s “scathing investigative report” that exposed the defendants’ apparent deceptions and omissions regarding the Endurance and Lordstown’s announcement that it was under investigation by the SEC.

“As a direct result of Defendants’ materially false and misleading statements, and the sharp decline in the market value of the Company’s shares, Plaintiff and other Class members have suffered significant losses and damages,” the complaint states.

The timeframe in the lawsuit begins on August 3, 2020, when Lordstown and DiamondPeak announced that they had entered into a definitive merger agreement through which Lordstown would be the surviving entity and become publicly traded, the suit says. According to the suit, the press release touted a purported 27,000 pre-orders, representing $1.4 billion in potential revenue, for the Endurance, Lordstown’s electric pickup that could allegedly run 250 miles on a single charge. Just weeks before going public, Lordstown announced in September 2020 that its book of pre-orders had grown to 40,000 and that the apparently large number of orders represented “strong commercial demand from actual customers operating fleets of trucks,” the case relays.

Lordstown and DiamondPeak, the suit says, issued in October 2020 a proxy statement soliciting shareholder approval of the merger. Per the case, the proxy statement again touted the significant number of pre-orders for the Endurance and represented that the orders came “primarily from fleet customers” while touting Lordstown’s ability to meet “its lofty commercial production and sales milestones.”

In the weeks following the merger’s approval, the defendants continued assuring investors of the growing demand for the Endurance and by January 2021, announced that pre-orders for the electric truck had “soared to 100,000,” a number represented as “unprecedented in automotive history,” according to the lawsuit.

The suit says the truth began to emerge when investment research firm Hindenburg Research published a March 12, 2021 investigative report titled “The Lordstown Motors Mirage: Fake Orders, Undisclosed Production Hurdles, and a Prototype Inferno” in which the firm claimed “conversations with former employees, business partners and an extensive document review” revealed that Lordstown is “an electric vehicle [special purpose acquisition company] with no revenue and no sellable product” who “misled investors on both its demand and production capabilities.” Citing the report, the lawsuit says Lordstown’s 100,000 pre-orders were “largely fictitious and used as a prop to raise capital and confer legitimacy,” noting that a substantial amount of the orders were not placed by commercial fleet operators or those who had the financial means to purchase the Endurance. Moreover, numerous orders were allegedly generated by a “small consulting firm” who was paid $30 to $50 per “pre-order,” the suit says.

The case goes on to state that the Hindenburg investigation reportedly revealed that the Endurance was still three to four years away from production, citing an interview with a former employee who stated the company had built fewer than 10 prototypes and had not completed required testing and validation in accordance with federal regulations.

Upon the publishing of the report, Lordstown’s share price fell 17 percent, the case says, and declined another 14 percent when Lordstown’s CEO revealed in a March 17, 2021 earnings call that the company was under investigation by the SEC.

Finally, the suit relays, Lordstown’s stock price fell another nine percent on March 24, when Hindenburg Research published pictures of an Endurance truck that had broken down and needed to be towed during the filming of a commercial just days before the merger was executed.

The lawsuit claims Lordstown investors have suffered “significant losses and damages” as a result of the company’s misleading statements and omissions.

The case looks to represent anyone who purchased Lordstown common stock between August 3, 2020 and March 24, 2021, as well as those who held DiamondPeak common stock as of September 21, 2020 and had the right to vote on the merger.

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