DETROIT — Lordstown Motors Corp. told regulators Tuesday that it needs more money to launch and sustain commercial scale production of its electric Endurance truck — and to make it through the next year.

The Ohio-based electric vehicle startup amended its annual regulatory filing with the Securities and Exchange Commission noting its doubts of continuing as a "going concern," an accounting term that means the company has the means to meet its financial obligations.

"Our ability to continue as a going concern is dependent on our ability to complete the development of our electric vehicles, obtain regulatory approval, begin commercial scale production and launch the sale of such vehicles," Lordstown noted in the filing. "The company believes that our current level of cash and cash equivalents are not sufficient to fund commercial scale production and the launch of sale of such vehicles."

The startup that took over General Motors Co.'s more than 50-year-old Lordstown Assembly plant in 2019 has been hit with other barriers to its success in the last few months. They now threaten its future — and GM's plan to repurpose the sprawling facility to keep automotive assembly alive in northeast Ohio's Mahoning Valley.

David Whiston, an autos equity strategist for Morningstar, said the notice "is serious for Lordstown. It likely will cause further stock price declines."

This disclosure, he said, has to be made if an auditor "has substantial doubt that the company can survive in its present state over the next year. It doesn't mean bankruptcy is a sure thing. Usually in this situation the remedies are major cost control moves and/or raising more capital. Of course capital raises get harder if the stock is falling hard."

Like other startups, Lordstown faces the capital- and labor-intensive process of transforming assembly plant created to build gas-powered products into an EV manufacturing site. It purchased the 6.2 million-square-foot assembly plant from GM in 2019 after the Detroit automaker halted production of its Chevrolet Cruze compact car there and closed the plant. GM owns 7.5 million shares of Lordstown's Class A common stock.

The startup previously noted its need for more capital during its May 24 first quarter earnings report. The automaker anticipated building 2,200 trucks this year, but if the company doesn't get additional funding it will build about 1,000 instead, CEO Steve Burns said on the company's first-quarter earnings call.

Lordstown reported a first quarter 2021 net loss of $125 million, capital expenditure funds of $53 million and cash of $587 million as of March 31.

"The design, manufacture and sale of vehicles is a capital-intensive business," the company wrote in its filing. "Our business plan to design, produce, sell and service the Endurance and any additional vehicles requires additional capital to complete research and development and build out of infrastructure and commence full commercial production."

The startup has been battling "challenges," including "significantly higher than expected expenditures for parts/equipment, expedited shipping costs, and expenses associated with third-party engineering resources," Burns said in the company's earnings release explaining the company's need for more capital. The cost of the challenges were reflected in the firm's $92 million research-and-development costs.

Another setback for Lordstown this year came with a March report from short-seller Hindenburg Research that accused the startup of misleading investors. Hindenburg claimed, in part, that orders for the Endurance truck were "largely fictitious and used as a prop to raise capital and confer legitimacy.

To get more capital, Lordstown is pursuing a U.S. Department of Energy Advanced Technology Vehicle Manufacturing loan. It's also inviting investors, media and analysts to its plant for tours, presentations and test drives of the Endurance truck and discussions with its executive team during a "Lordstown Week" event later this month.

Wedbush analyst Dan Ives said in a statement Lordstown's filing "adds uncertainty at a white-knuckle time for the Street on the name. It's been a nightmare situation for the bulls and this certainly does not help the situation and sentiment."

Lordstown shares dropped 16% to $11.22 at close of trading Tuesday and dipped below $10 Wednesday morning.

Trending Food Videos

Recommended for you

Loading...
Loading...