What happened
Shares of Lordstown Motors (RIDE -0.58%) have dropped almost twice as much as the S&P 500 index over the past month, declining nearly 15%. That downward move continued today with the stock lower by 5% as of 11:18 a.m. ET.
So what
The stock falloff came despite the company announcing on Sept. 29 that production of its Endurance electric pickup truck has officially begun. The Endurance is being marketed as a commercial truck ideal for job site work. But it is entering a crowded field of new electric pickup trucks from the likes of both start-up electric vehicle (EV) companies and traditional automakers building new EV lineups.
Image source: Lordstown Motors.
It also comes at a precarious time, with the economy on a path toward lower growth or perhaps contraction and a recession. Yesterday's inflation data showed the Consumer Price Index rose 0.4% in September month over month, or at an 8.2% rate versus one year ago. That's not good news for Lordstown, which ended the second quarter with only $236 million in cash.
Now what
Lordstown pivoted its plans because of its financial condition and the capital-intensive process of vehicle manufacturing. It closed an agreement with contract manufacturer Foxconn in the second quarter to sell its manufacturing assets to Foxconn and have that company produce the Endurance. That deal provided Lordstown with $107.5 million of the cash balance in the second quarter.
In total, that agreement will bring nearly $260 million in total proceeds to Lordstown. The company felt that move was its best course of action to continue operating. But the Endurance still has to sell well for the company to bring in much-needed cash. This economic environment isn't an ideal setup for that to occur. Investors should hear more when Lordstown reports its third-quarter update likely in the first half of November.
