Bankrupt electric truck maker Lordstown Motors Corp will have to pay out $25 million to shareholders, settling SEC claims it misled investors and broke anti-fraud and reporting rules in US federal securities laws.

Lordstown, which filed for Chapter 11 bankruptcy protection in Delaware federal court in June last year, had told the investors it received 27,000 "pre-orders" from fleet customers, "representing $1.4 billion in potential revenue" for its flagship Endurance electric pickup truck.

But the feds claimed in a settled order filed yesterday [PDF] that the company had exaggerated the demand. The agency said while Lordstown had "stated on several occasions that its pre-orders were from, or 'primarily' from commercial fleets, in fact many pre-orders were obtained from fleet management companies ... and so-called 'influencers'."

It added: "The Special Committee also stated that one entity that provided a large number of pre-orders did not appear to have the resources to complete large purchases of trucks."

The SEC also claimed that the automaker had fudged its timeline for delivery to keep "first mover" advantage in bringing out the "first full-size electric pickup truck."

Lordstown went public in 2020 as part of a $675 million merger with SPAC DiamondPeak Holdings Corp, and the SEC alleged that it had made false statements both before and after its Nasdaq listing. It also claimed specifically that from August 2020 to January 2021, Lordstown and Burns "made false and misleading statements about Lordstown's access to certain critical parts from GM to develop the Endurance."

Besides paying the $25 million to settle shareholder class action suits in Delaware and Ohio, Lordstown also agreed to a cease-and-desist order, more than $80,000 in civil penalties, and promises to improve its policies and procedures.

The company is neither admitting nor denying the allegations against it.

"We allege that, in a highly competitive race to deliver the first mass-produced electric pickup truck to the US market, Lordstown oversold true demand for the Endurance," said Mark Cave, associate director of the SEC's Enforcement division. "Exaggerations that misrepresent a public company's competitive advantages distort the capital markets and foil investors' ability to make informed decisions about where to put their money."

Lawsuit against Foxconn

As we previously reported last year, Lordstown claims Foxconn is to blame for at least some of its woes. In a lawsuit it filed with its bankruptcy protection case, Lordstown alleged that Foxconn failed to abide by the terms of a deal to invest up to $170 million in the struggling EV startup, as well as not engaging with Lordstown on projects it had promised to support.

In an adversary complaint [PDF] against Foxconn and its affiliates, Lordstown accused the iPhone maker of "maliciously destroying" its business, "stripping" its assets, and "poaching" its talent. Foxconn has strongly denied the allegations. ®

https://www.theregister.com//2024/03/01/lordstown_sec_settlement/