Lordstown Motors Investors Get Taken For A Ride

Lordstown Motors Growth Story Falls Apart

What was once one of the most promising SPAC-related EV growth stories in the market, Lordstown Motors NASDAQ: RIDE, may be falling apart. Lordstown Motors’ decline began earlier this year when Hindenburg research released its short report and the fundamental story has only gotten worse since. The company recently announced it didn't have enough money to carry forward its plans, it's received several downgrades, and now the CEO and CFO have been ousted.

CEO Steve Burns and CFO Julio Rodriguez have been removed from their positions following a probe of the board. The board formed a special committee to look at Hindenburg Research’s claims and it found some Merit to the report. Specifically, there was some question about the veracity of the pre-orders,  important figures for valuing the stock and projecting future Capital needs. 

The lead independent director Angela Strand has been named executive chairwoman and will take over the CEO duties until a new CEO can be found. Board member David Hamamoto had this to say, “ as we transition to the commercial stage of our business -  with planned commencement of limited production in late September - we have to put in place a seasoned management team with deep experience leading operating publicly-listed OEM companies.”

Lordstown Motors Is Still A Going Concern

Lordstown Motors shocked investors when it revealed that its status as a going concern was in jeopardy. A going concern is a business that can meet its financial obligations and it appears that, at least for now, Lordstown Motors still qualifies. At present, the company still has enough capital to ensure continued operations, meet supplier obligations, and to at least begin the production of its Endurance pickup truck later this year. Notably, the Endurance pickup truck is the most visible competition for the Ford Lightning that we see dominating the category for many years to come.

The financial future of Lordstown Motors is of particular interest to General Motors which not only sold the company its main production facility but also has a $25 million investment in the company. There's been no sign of GM coming to Lordstown Motors’ aid but it is a possibility.  It is our opinion that Mary Barra will wait for some indication of stability ie a new CEO before committing more money. Lordstown Motors is also close to closing a deal with the Department of energy for a $200 loan to help retool its Factory.

The Analyst Cool Towards Lordstown Motors

The analysts had been cooling towards Lordstown Motors over the past 6 months and the sentiment he's going to get frostier in the near term. The consensus estimate for the share price is down 44% In the last 90 days and heading lower based on today's activity. The most recent downgrade comes from R. F.Lafferty who lowered the stock to a sell from neutral with a price target of $3. This compares with the consensus target of $14 which still assumes a fair amount of upside for the stock. In our view, this market may be nearing a bottom but some risks remain. The company still needs to get a new CEO, secure financing/funding, and begin production.

The Technical Outlook: Lordstown Motors Falls 20%

Shares of Lordstown Motors fell more than 20% in the wake of the CE/ CFO departure but it looks like support levels are holding. The price action is holding above the $9 level which may be the bottom, or very near the bottom for this market. We expect to see volatility in the near term but plan to watch the market closely for signs of support and underlying strength. If the company can navigate this dark time, it may possibly become an attractive buy later on this year.