When electric pickup maker Lordstown Motors took over an old General Motors plant in Ohio in 2019, it had big ambitions — and made a lot of promises.
It promised a revival for a community agonizingly familiar with lost jobs. It named itself after the town, Lordstown, and named its future truck the Endurance, after the region's enduring residents.
And it promised a fast timeline. Lordstown aimed to bring the first mass-produced electric pickup truck to market, built right there in that old GM plant.
Then the pandemic struck, and the timeline went out the window. Lordstown has yet to sell a single vehicle, after repeated delays in the launch of the Endurance — and now it's being accused of fraud by an investor hoping to profit from its fall.
Lordstown could very well deliver on all its promises, and it's still confident that it will. But for now, the allegations of deception have landed the company in the midst of a raging debate taking place in the buzzy world of electric vehicle startups: How do you tell a boom from a bubble?
Investors — confident that the need to fight climate change will drive huge growth in electric vehicles — are eager to catch the next Tesla and have thrown mind-boggling quantities of money at companies promising to be the next big auto-making star.
That includes Lordstown. The company went public by merging with a SPAC, an increasingly popular way for companies to list on the stock market without the hassle of an initial public offering. It was valued at $1.6 billion, even before selling a single vehicle .
But Hindenburg Research, a prominent short seller, is accusing Lordstown of peddling empty promises.
Short sellers are investors who place a bet that a company's stock will fall; they make money if stock values go down. Some, like Hindenburg, place their bets and then reveal or publicize negative information about their targets.
In its report, Hindenburg called Lordstown Motors a "mirage." The short seller challenged the company's much-referenced 100,000 pre-orders, noting that some of the non-binding orders appear to have been placed by companies with little likelihood of following through with a purchase. It published a 911 call, apparently from a Lordstown employee, about a prototype vehicle catching fire during testing.
One detail from the report sums it up neatly. The short seller referred to a video of Lordstown robots at work, noting only one of the robots seem to be creating sparks — a lot of movement, with little achievement.
The report caused Lordstown stock to drop, as the short seller intended, and it sparked at least one lawsuit. It also came out as the company was already receiving inquiries from the Securities and Exchange Commission.
Lordstown Motors has acknowledged the report and says its board of directors is reviewing the allegations. The company's CEO, Steve Burns, has also pushed back against several of its accusations.
The pre-orders? On CNBC, Burns said pre-orders are "always, by definition, non-binding" and "I don't think anybody thought we had actual orders." He says firmer purchase commitments are being nailed down now.
The 911 call? On Lordstown's first earnings report as a public company, Burns told investors that the test vehicle that caught on fire had been hand-assembled and there was human error in the assembly. He noted, accurately, that the risk of a battery fire is a problem all electric carmakers must grapple with.
Those sparkless robots? The company uploaded a new video, with a dramatic soundtrack and an abundance of sparks.
There may have been delays, but Lordstown is adamant that the truck, the production line and the customer demand are all fundamentally real.
"I quoted Taylor Swift to someone the other day," Burns told reporters on Monday. " 'Haters gonna hate, hate, hate.' You gotta 'shake it off.' "
The war of words between Hindenburg and Lordstown is similar to a tussle the short seller had with a different zero-emissions vehicle company, Nikola, that ended with the resignation of the startup's chairman over allegedly false statements.
But the dispute points to a larger tension, too. You don't have to believe a CEO is committing fraud to be skeptical of the sky-high valuations some electric car start-ups are enjoying right now.
Tesla launched a brand-new car company focused on electric vehicles and rose to a position of dominance — but it took years, and plenty of setbacks. Now established carmakers are throwing their copious resources toward electric vehicles, too.
The new entrants? Despite all the money thrown at the nascent industry, many of these startups have yet to deliver a finished product, or any revenue, and they likely won't for months.
Jaime Perez, a stock analyst with RF Lafferty, is not bothered by the short seller report but he does say Lordstown will need to deliver.
"You're telling us what [you're] going to do. We want to start seeing what you're doing," he says.
This challenge — call it the "dude, where's my car" dilemma — is hounding a lot of buzzy electric vehicle startups.
The reality is that making a vehicle is a tall order for a brand new company. Not a hand-assembled prototype or test model, but a production-ready vehicle that can be sold for real revenue.
Bollinger Motors was aiming at a mid-2020 vehicle launch; now it's targeting 2022. The Lucid Motors Air luxury sedan was postponed several times. Nikola's Badger electric pickup was canceled completely after the short seller spat. The startup Canoo — which relies on other companies to actually build its designs — won't see revenue until 2022.
The coronavirus unquestionably played a role in these delays. But some investors still have questions.
"Until we actually see a car on wheels and driving around, investors and analysts won't be convinced," Perez says.
So when will the rubber meet the road?
Lordstown, for its part, is making a new promise: it will have a beta vehicle by the end of March, with production for customers starting this fall.
Even if it makes that target, it may not be first. Rivian, another electric pickup startup, says it will start deliveries this June.
Correction: March 25, 2021 12:00 am — The audio, and a previous version of the digital story, stated the Hindenburg Research report triggered inquiries from the Securities and Exchange Commission; in fact, those inquiry began before the report was publicly issued.