Hindenburg’s research goals for short sellers are the start of the Lordstown Motors vehicle team; Shares fall 16%

The startup is named after the city of Ohio, where the company bought a former latent General Motors Co.

assembly plant in 2019. As a result of this agreement, GM acquired a small stake in Lordstown Motors. A GM spokesman declined to comment immediately.

The Wall Street Journal has not been able to independently verify the allegations in the Hindenburg report.

Shares of the Ohio-based company fell 16% after the report was released Friday morning. Hindenburg, who last year headed for another electric truck boot, Nikola Corp.

—He revealed in his latest report that he holds a short position in Lordstown Motors, which means he will benefit from the lower price of the company’s shares.

The Hindenburg report described Lordstown Motors’ order book as a “mirage” and, among other allegations, said it paid an external consulting group to generate orders for its truck before its agreement was made public on 2020. The report cites documents and conversations the firm said it had with former employees and business partners.

Burns confirmed that the company paid consultants to generate pre-orders that were understood to be non-binding as a way to assess market demand, but denied distorting its pre-order book.

“We don’t claim that these are orders and we have never declared that,” he said.

Lordstown Motors is among the various clean transport companies that have been made public over the past year amid growing interest from investors in electric vehicles. The company was listed last year through a deal with a special-purpose acquisition company, or SPAC, DiamondPeak Holdings Corp., which valued the company at $ 1.6 billion.

The company, which had a market value of $ 2.9 billion on Thursday, has not yet sold a vehicle. It targets the commercial truck market, vehicles commonly used by fleet operators in business or government environments.

Lordstown Motors and Mr. Burns have regularly pointed out its pre-order book to underscore the strength of demand for its upcoming commercial van, Endurance, and promote its business to investors. “Most of them are signed by the CEOs of these big companies,” Burns said about the commissions in a CNBC interview in November. “These are very serious orders.”

In a regulatory disclosure in December, Lordstown Motors said it had no current customers or pending orders, and there was no guarantee that non-binding orders would turn into sales. In a January statement, Lordstown Motors said the more than 100,000 reserves of its Endurance truck were not binding.

Hindenburg said those orders were not only non-binding, but also “largely fictitious” and did not represent “genuine demand.” The New York-based research firm, led by Nathan Anderson, said it spoke with several companies and municipalities that the company believes has made a reservation.

Some reserves of 1,000 or more trucks came from businesses that did not operate commercial fleets, Hindenburg said. Other people with prior reservation told the firm that they had no means or intention to buy the number of trucks tied to the reservation, according to the report.

In response to these claims, Mr. Burns said the company is confident there is demand for its trucks and that pre-orders were a way to measure interest as it prepares the factory to build certain volumes. He also said that some of these companies are not fleet operators, but intermediaries.

“If a guy signed a piece of paper that said ‘I think I can move x-mil’, we believe them. But it’s not in blood. It’s a non-binding letter of intent,” he said.

The report also said Lordstown Motors was lagging behind in starting production at the Ohio plant in September and was facing undisclosed production delays. He said former employees told Hindenburg that the start-up was still building battery packs by hand, despite plans to mass-produce them at home.

Burns said Lordstown Motors is still on track to start building trucks ready for the market in September and that much of the equipment needed to make the battery packs is being installed.

Hindenburg also said a prototype of the new Lordstown Motors truck caught fire ten minutes after its first road test in January. The firm cited a police report it obtained through public registration applications. Burns confirmed the fire, but said it was determined it was caused by human error during assembly.

Lordstown Motors initially outlined plans to start production in late 2020. The company later pushed back the schedule until January 2021, citing the disruption of the Covid-19 pandemic, and recently delayed the start of production in September.

In January, Lordstown Motors said it had begun building 57 truck prototypes to test them. He has also said he is working on an electric van, which will go into production in the second half of 2022.

Lordstown Motors is scheduled to report on its fourth quarter financial results and host its first investment conference on Wednesday.

Mr. Anderson of Hindenburg and a journalist from The Wall Street Journal are among the more than 20 defendants in a lawsuit filed by private equity firm Catalyst Capital Group and Callidus Capital Corp. alleging a short sale conspiracy related to a 2017 article on Catalyst. A spokesman for the newspaper said the news organization is confident in the fairness and accuracy of its reports. Anderson said, “We keep our research on the topics 100%.”

Last fall, Hindenburg released a report on Nikola, accusing the Phoenix-based electric and hydrogen truck maker of being an “intricate fraud” and making misleading statements. Following the report, Nikola’s shares grew, the company received subpoenas from the Securities and Exchange Commission and the Department of Justice and its founder Trevor Milton left the company.

Nikola has described the report’s claims as false and misleading. In a recent regulatory filing, he said that in an internal review of Hindenburg’s allegations it was found that nine statements by the company or Mr. Milton were totally or partially inaccurate, but that they discussed the characterization of the company’s report. as fraud.

Lordstown Motors acquired the plant in November 2019 from GM for $ 20 million, according to a regulatory record. GM later forgave the purchase obligation, other loans and interest in exchange for 7.5 million shares of Lordstown Motors, or a 4.5% stake, according to the documentation.

Write to Ben Foldy to [email protected] and Mike Colias to [email protected]