Lordstown Motors (RIDE) is reportedly under investigation by the Justice Department, adding to problems for the struggling electric-truck startup. RIDE stock fell.
The probe, reported by the Wall Street Journal, represents the latest round of scrutiny for the company. It follows executive departures and questions about the accuracy of its preorders.
And it comes amid questions over its ability to secure funding ahead of plans to begin producing a full-size, all-electric pickup, the Endurance, in September.
Precise details of the probe weren’t immediately clear. Lordstown, in an email statement, said it is “committed to cooperating with any regulatory or governmental investigations and inquiries.”
The statement added that “We look forward to closing this chapter” so that its new leadership and team could focus on producing the Endurance.
That statement did not address emailed questions about the nature of the reported inquiry. The Justice Department was not immediately available for comment.
The Journal said the U.S. Attorney’s Office in Manhattan was handling the inquiry, and that it was in the early stages. The story noted that the Securities and Exchange Commission had begun looking into Lordstown’s decision to go public and details about its preorders.
The company, backed by General Motors (GM), has faced allegations from short-seller Hindenburg Research that it misled investors with “largely fictitious” orders.
It has also faced questions in recent days over executives’ sales of Lordstown Motors stock. Top executives last month resigned.
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Shares sank 9% in the stock market today. IBD’s ratings for RIDE stock are weak, showing a Composite Rating of 2, of a possible 99, and an EPS Rating of 1. Shares of Workhorse (WKHS), which has a 10% stake in Lordstown, sold off 9%.
Among other EV startups, Canoo (GOEV) fell 2%, Fisker (FSR) lost 1.5% and Arrival (ARVL) eased 2.3%.
RIDE stock went public last October via a special purpose acquisition company, or SPAC. That process avoids some of the regulatory requirements found in a traditional IPO to get to market sooner. But SPAC critics say the additional scrutiny from the IPO process is necessary.
Lordstown, when it announced the executive resignations, cited its “transition from the R&D and early production phase to the commercial production phase of its business.”
That announcement came the same day that the company said a committee found the Hindenburg report was in “significant respects, false and misleading.” However, the committee found Lordstown “made periodic disclosures regarding preorders which were, in certain respects, inaccurate.”
The company is seeking ways raise capital after warning it may not survive without raising more money. Lordstown last month said it may not be able to continue as a “going concern” if it cannot raise more money to prepare its factory in Lordstown, Ohio, for mass production.
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