CLEVELAND, Ohio — An investor in the Lordstown Motors Corp. filed a lawsuit against the electric truck-maker Thursday, alleging that it offered false and misleading information about the vehicle and the time needed to get production started.
Matthew Rico filed the document in U.S. District Court in Youngstown just days after an analyst reported the company’s pre-orders for its vehicles “are largely fictitious and used as a prop to raise capital and confer legitimacy.” Amid the report, the U.S. Securities and Exchange Commission has launched an investigation into the business.
Attorneys for Rico are seeking class-action status to include other investors. The lawsuit says the company “made untrue statements of material fact” and omitted other information that caused investors to pay for artificially inflated prices for the company’s shares.
Company officials did not return emails seeking comment for this story.
The lawsuit comes just days after financial analyst Hindenburg Research wrote a report that carried the headline: “The Lordstown Motors Mirage: Fake Orders, Undisclosed Production Hurdles and a Prototype Inferno.”
The report, cited throughout the lawsuit, says the first test drive of the company’s flagship truck, Endurance, burst into flames 10 minutes after it hit the road. The report also says Lordstown Motors Corp. “has no revenue and no sellable product.”
The truck company is building its fleet in the old General Motors’ plant in Lordstown, just off the Ohio Turnpike, in Trumbull County. General Motors closed its Chevy Cruze line in March 2019, which put more than 1,000 employees out of work. Lordstown Motors later purchased the plant.
An attorney for Rico, Jeffrey Block, said in an interview that the company’s announcement of thousands of pre-orders of vehicles prompted many investors to get behind the venture. The lawsuit, citing the Hindenburg report, says that many of the pre-orders were non-binding and fake. The company’s chief executive officer, Stephen Burns, paid for customers to book “valueless, non-binding pre-orders” out of desperation to claim a demand for the vehicle, the lawsuit says.
The document also cites a report last month in Yahoo Finance that quoted Burns as saying, “we have pre-sold 100,000 of these vehicles to various fleets across America.”
In a statement in January, the company said the number of pre-orders “is unprecedented in automotive history.”
“Adding in the interest we have from federal, state, municipal and military fleets on top of that, I think you can see why we feel that we are about to revolutionize the pickup truck industry,” Burns said in the statement.
In an interview with MSNBC on Thursday, Burns said the pre-orders were simply to gauge interest in the vehicles.
“I don’t think that anyone thought that we had actual orders,” Burns said.
The lawsuit says Lordstown Motors sought to begin production in September. The suit, however, says it “is not and has not been ‘on track’ to commence production of the Endurance in September.”