Hindenburg Research, the short seller whose investigation into Nikola Motors toppled the company's founder and set its stock into a tailspin last fall, now has set its sights on the electric truck startup Lordstown Motors. In an 8,000-plus-word report posted Friday morning, Hindenburg accused the Ohio-based company of pumping fake orders to artificially boost demand for its forthcoming Endurance pickup truck, published quotes from former employees describing Lordstown CEO Steve Burns as a "con man" and collected evidence showing the entire Endurance project is possibly years behind schedule—despite Lordstown's promises that production will begin this fall.
Burns responded publicly in an interview with the Wall Street Journal, condemning the report as being full of "half-truths and lies" while claiming that the company's touted list of 100,000 pre-orders were never supposed to be seen as firm commitments. He denied that production plans for the pickup truck are behind schedule, though no evidence was presented and the company itself has yet to formally respond.
All along, the Lordstown Endurance pickup—with its promised quad hub motor system, 600 horsepower, 6,000-pound towing capacity and 250-mile range—is what's been drawing in investors, including General Motors. GM pitched in $75 million last August after originally selling its former Chevy Cruze factory to Lordstown's owners for a song. Of course, GM also announced an extensive partnership with Nikola Motors just before Hindenberg did its thing last fall.
Lordstown has publicly stated that it has 100,000 pre-orders for the Endurance pickup, largely attributed to businesses and municipalities that wish to acquire all-electric vehicle fleets. One such interested buyer is a company called E Squared Energy, whose deal with Lordstown is on the books for 14,000 trucks to the tune of $735 million; the report notes that the company appears to be run by two employees out of a "small apartment in Texas," and further highlights other potential customers who supposedly have "no intent" of purchasing Endurance pickups.
"We are not stating these are orders and have never stated that,” Burns said to WSJ. He continued later on, “If a guy signed a piece of paper that said ‘I think I can move x-thousand of them,’ we believe them. But it’s not in blood. It’s a non-binding letter of intent."
The report mentions other potential customers who supposedly have "no intent" of purchasing Endurance pickups. Hindenburg claims that the bulk of these allocations were placed by consulting firms that Burns paid "$30 per non-binding 'order'" to pump stocks and increase cash flow. Burns admitted that this happened, but he reiterated that the company referred to these as "non-binding production reservations" in press releases and financial disclosures.
That's true—but it's also true that Burns and Lordstown constantly called them "pre-orders" over the last year and were happy to let people think that meant something beyond possible interest from anyone who might conceivably want to order just about any electric pickup.
Lordstown CEO Steve Burns with former President Donald Trump and a Lordstown Endurance prototype.
Burns himself didn't escape Hindenberg's net; the report cites former senior employees who straight up called him a "con man" and compared him to PT Barnum. He was formerly the CEO of EV startup Workhorse, from which he resigned in late 2019 to start Lordstown. In the time since, he has promised thousands of jobs to the people of Lordstown, Ohio, who were arguably hung up to dry after GM withdrew from its factory there and later sold it to a group led by Burns.
While Lordstown has yet to answer requests for comment from several media outlets, Burns has elaborated on the claims made in Hindenburg's screed to hopefully calm investors. He says the company is still on track to build real, production-spec pickups this fall after recent capital improvements to the factory, and insists that the potential electric automaker never misled its investors.
In terms of the Endurance truck's production deadline, it's been pushed back further and further since November 2019. Manufacturing was initially intended to begin in the fourth quarter of 2020, though come April of last year, Lordstown had delayed it to January 2021, then September. A video posted to Lordstown's social media accounts on March 10 showing a bare chassis undergoing off-road testing does little for the impression that things are on schedule.
Hindenburg mentioned specific hang-ups, including fundamental last-minute changes. A former employee allegedly said the startup “totally switched from a plastic exterior to aluminum” to save weight on the Endurance pickup, and due to these supposed reversals, Lordstown is said to be far behind on crucial vehicle testing.
Critically, one other alleged trouble spot has been the battery pack. Burns said before that all of Lordstown's battery packs would be manufactured in-house, though a former employee interviewed by Hindenburg says there's no such equipment to do so onsite. Instead, workers have purportedly been piecing together battery packs by hand. That might explain why the company's very first road test ended 10 minutes later with an Endurance pickup prototype in flames, as the report describes; Burns told the Journal it was caused by "human error during assembly."
It's important to note that as an investigative short seller, Hindenburg benefits when the target company's stock falls, and it's published similar reports in the past pertaining to various startups aside from Nikola and Tesla. And there are genuine stakeholders behind the company who want badly to to make it work—namely the good people of Lordstown, Ohio, who are counting on Lordstown Motors to bring a wave of high-paying manufacturing jobs back to the struggling region. If these claims prove true and it's all headed towards disaster, the impacts will be felt far beyond shareholder wallets.
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