What happened

Shares of electric truck start-up Lordstown Motors (RIDE -2.26%) opened sharply lower on Friday, after a prominent short-seller alleged that the company has misled investors about its production capabilities and demand for its upcoming pickup truck.

As of 10:15 a.m. EST, Lordstown's shares were down about 20.3% from Thursday's closing price. 

So what

Electric vehicle investors will no doubt remember Hindenburg Research, the short-selling firm that last September released a devastating report on Nikola (NKLA 0.76%). Among the consequences of that report: Nikola's stock price fell sharply and its founder was forced to resign.

Lordstown's stock is down today because Hindenburg just released another report that makes similarly tough allegations. Among them:

  • Lordstown has greatly exaggerated the number of preorders for its upcoming Endurance electric pickup truck. 
  • Lordstown has announced large fleet orders from companies that don't have the financial capability to follow through and purchase the trucks, and that in some case may not even exist.
  • Lordstown CEO Steve Burns has been paying consultants to generate pre-orders for several years, beginning when he was CEO of Workhorse Group (WKHS 1.58%). (Workhorse owns about 10% of Lordstown.) 
  • While Lordstown has said that production of the Endurance will begin in September, the company has been making drastic changes to the truck's design and could be as much as three to four years away from the true start of production.  
  • Lordstown has claimed that it will build its battery packs in-house, but the equipment to do so won't arrive at its factory for months. 
  • Lordstown's first on-road test of an Endurance prototype, in January, ended after 10 minutes when the vehicle caught fire. 
A silver Lordstown Endurance, a prototype electric pickup truck.

Among Hindenburg's allegations: Lordstown's Endurance is years, not months, away from production. Image source: Lordstown Motors.

Now what

Investors should keep in mind that right now these are just allegations. They should be taken with a grain of salt, at least until the company responds. That said, Hindenburg's allegations against Nikola turned out to be mostly accurate, and that gives its case some credibility here. Trade carefully.