Top executives at Lordstown Motors, the embattled electric truck startup, sold millions of dollars in shares of the company earlier this year before reporting financial results and disclosing trouble at the firm.
Five executives, including Lordstown’s president and its former CFO, sold more than $8 million in stock over three days in early February, according to the filings, which were first reported by the Wall Street Journal.
One of the company’s executives, Chuan Vo, sold more than 99 percent of his vested equity in the company on Feb. 2, profiting more than $2.5 million, the filings show.
President Rich Schmidt, a former Tesla executive who joined Lordstown in 2019, sold almost half, or 39 percent, of his vested equity in the company over Feb. 2 and Feb. 3 for $4.6 million, the filings show.
A spokesman for Lordstown, which went public in October, told the Journal that Schmidt used some of the proceeds to expand his turkey-hunting farm in Tennessee.
Between Feb. 2 and Feb. 4, three other executives, including former CFO Julio Rodriguez, who abruptly resigned last week, sold smaller holdings worth between $250,000 and $400,000, additional filings show.
Those sales came about a month before the company published disappointing full-year 2020 results and told investors that the company was being questioned by the Securities and Exchange Commission.
Since then, the company’s situation has snowballed, with sudden departures of its CEO and CFO, and a recent warning that the company might not have enough cash to continue operating for much longer.
The stock has fallen significantly since those February sales took place. It was last seen trading at just over $10 per share, down from over $30 per share in mid-February.
Securities lawyers, accountants and analysts who spoke with the Journal noted that the sales were particularly unusual because they occurred after the most recent quarter ended and before results had been published.
Most publicly traded companies institute a so-called blackout period, during which executives are barred from trading their shares, around the time that the Lordstown transactions occurred.
In addition, the executives sold substantial portions of their shares in the company shortly after it went public in October following an SPAC merger — raising questions about their confidence in the 2-year-old startup’s viability.
“At best, it suggests the company has weak internal control over the trading of their officers,” Daniel Taylor, an accounting professor who runs the Forensic Analytics Lab at the University of Pennsylvania’s Wharton School, told the Journal.
When reached for comment, a representative for Lordstown pointed to a statement issued last week summarizing the findings of a special committee formed by the company to investigate allegations made against it by short-seller Hindenburg Research.
In that statement, the special committee acknowledged “certain Lordstown Motors directors and executives have sold or transferred shares in the Company.”
The company added that “each such director and executive retained substantial Lordstown Motors equity holdings in the form of shares and options following the sales and transfers described in the Company’s public filings.”
Nate Anderson, the founder of Hindenburg Research, took to Twitter to comment on Lordstown president Rich Schmidt’s stock sale — mocking the turkey-hunting farm explanation.