Please ensure Javascript is enabled for purposes of website accessibility

Why Lordstown Motors' Stock Is Sinking Today

By John Rosevear – Jun 14, 2021 at 10:46AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Last week's going-concern notice was bad. This is worse.

What happened

Shares of Lordstown Motors (RIDE -9.65%) were down sharply on Monday morning, after the company said that its CEO and chief financial officer had resigned following an investigation by the board of directors.

As of 10:15 a.m. EDT today, Lordstown's shares were down about 20% from Friday's closing price. 

So what

Lordstown said on Monday morning that CEO Steve Burns and CFO Julio Rodriguez have resigned from the company effective immediately. The trigger? A committee of independent board directors found that one of the key allegations made by short-seller Hindenburg Research -- that Lordstown had exaggerated the number of pre-orders for its Endurance electric pickup truck -- had merit. 

A silver-blue prototype of the Lordstown Endurance, an electric pickup truck designed for fleet use.

Lordstown said it still expects to launch its Endurance pickup truck this fall. But with the company in disarray, will there be any buyers? Image source: Lordstown Motors.

Lordstown's shares were hit hard last week after the company said in a regulatory filing that it might not have sufficient cash to stay in business for another year. The disclosure, known as a "going concern" notice, was inserted by the company's auditors in a revised 10-K annual report that also noted that the company's financial controls in 2020 had not been adequate. 

Although the independent directors' report concluded that some of the other allegations made by Hindenburg in March were not accurate, the validation of auto investors' concerns about the company's pre-orders -- and the resignation of Burns, until now the public face of the company -- were enough to trigger today's sell-off.

Now what

Lordstown said that Angela Strand, a former Workhorse Group (WKHS -10.31%) vice president who has been serving as an independent director, will lead Lordstown on an interim basis while it searches for a permanent CEO. AlixPartners' Becky Roof has agreed to serve as Lordstown's interim CFO. 

John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Lordstown Motors Corp. Stock Quote
Lordstown Motors Corp.
$1.82 (-9.65%) $0.20
Workhorse Group Inc. Stock Quote
Workhorse Group Inc.
$2.61 (-10.31%) $0.30

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.