Lawsuit alleges electric ute start-up defrauded investors

A shareholder lawsuit has been filed against an electric ute start-up company alleging it has defrauded investors by making spurious claims about the number of pre-ordered utes and the progress it has made in starting production at a former General Motors plant in Ohio.

The lawsuit has been filed by shareholder Chris Rico against Lordstown Motors Corp. in the Youngstown federal court in Ohio and seeks certification as a class-action complaint, Stuff reports the Associated Press (AP) as saying.

Lordstown Motors chief executive Steve Burns has acknowledged the US Securities and Exchange Commission (SEC) is holding an enquiry based on a critical report issued by the investment firm Hindenburg Research, which holds a short position on Lordstown Motors stock, AP says.

It says a shareholder lawsuit was filed on March 18 against Lordstown Motors, claiming it has defrauded investors and lied about pre-orders for its Endurance “pickup” or ute.

Burns, speaking during the company’s first earnings call, is reported as saying the company’s board of directors has formed a special committee “to review matters” surrounding the SEC enquiry.

A company spokesperson did not respond to an emailed request for comment about the lawsuit on Thursday, AP adds.

The complaint is essentially based on the Hindenburg Research report that claims Lordstown Motors has “no revenue and no sellable product” and has “misled investors on both its demand and production capabilities”, Stuff reports.

The report and lawsuit claim that according to a former employee, estimated production is three to four years away, while Burns has reportedly said production is due to start in September.

The company also claims it has presold 100,000 trucks to various US fleets. However, those orders, are non-binding according to the lawsuit which alleges that, according to documents, investors, business partners and former employees; “the company’s orders are largely fictitious and used as a prop to raise capital and confer legitimacy”, AP says.

The Hindenburg report said a recently announced US$735 million deal for 14,000 trucks was to a purported buyer who doesn’t operate a vehicle fleet and is based out of a small apartment building in Texas, AP adds.

A drivable Endurance prototype from Lordstown reportedly caught fire during a January test drive.

Lordstown Motors plans to enter a race version of its Endurance in the SCORE International San Felipe 250 event in Baja, California, on April 17.