Did EV Makers Promise Too Much?
Posted on 03/04/2024
The Securities and Exchange Commission (SEC) charged Lordstown Motors Corporation with misleading investors about the sales prospects of Lordstown’s flagship electric pickup truck, the Endurance. Lordstown filed for bankruptcy in 2023. It went public by merging with a special purpose acquisition company (SPAC) in 2020.
According to the SEC’s settled order, Lordstown exaggerated the demand for the Endurance, claiming that the company had received more than 100,000 nonbinding “pre-orders” for the vehicle from commercial fleet customers when, in reality, most of the pre-orders came from companies that did not operate fleets or intend to buy the truck for their own use. The SEC’s order also found that Lordstown misrepresented the company’s timeline for delivering the Endurance by failing to account for production delays partially due to Lordstown’s inability to access many critical parts. In 2021, the EV maker in 2021 was slapped with 11 class-action lawsuits. The EV truck manufacturer combined with DiamondPeak Holdings in October 2020 in a transaction valued at over US$ 1.6 billion.
“We allege that, in a highly competitive race to deliver the first mass-produced electric pickup truck to the U.S. market, Lordstown oversold true demand for the Endurance,” said Mark Cave, Associate Director of the Division of Enforcement. “Exaggerations that misrepresent a public company’s competitive advantages distort the capital markets and foil investors’ ability to make informed decisions about where to put their money.”
That’s not the only problem in the industry. A federal grand jury indicted Trevor Milton, founder of electric carmaker Nikola Corporation, on three counts of criminal fraud for lying about “nearly all aspects of the business” to bolster Nikola stock sales of the electric vehicle start-up, according to an indictment. The case was assigned to U.S. District Judge Edgardo Ramos. Trevor Milton has pleaded not guilty to fraud charges and will be issued bail secured against his two properties in Utah. He would be barred from contacting investors. Nikola Corporation has emphasized that the allegations are against Milton and not Nikola.
At one point in the summer of 2020, Nikola’s valuation surpassed Ford Motor Company, peaking at US$ 31 billion. Milton allegedly concealed the progress and success of Nikola’s technology. Trevor Milton resigned as Nikola chairman in September 2020.
Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Trevor Milton brazenly and repeatedly used social media, and appearances and interviews on television, podcasts, and in print, to make false and misleading claims about the status of Nikola’s trucks and technology. But today’s criminal charges against Milton are where the rubber meets the road, and he now will be held accountable for his allegedly false and misleading statements to investors.”
EVs
As the perceived infinite money disappeared, Rivian Automotive’s stock price has dropped from its highs. Revealed in early 2024, Rivian planned to cut 10% of its salaried workforce and set production plans well below Wall Street’s expectations.
