The Securities and Exchange Commission (SEC) alleges Lordstown Motors misled investors about flagship electric vehicle

Lordstown was found to have breached various antifraud, proxy, and reporting regulations under federal securities laws. Without acknowledging or refuting the SEC's conclusions, Lordstown has consented to a cease-and-desist directive and repayment of $25.5 million.

Fires, Short Sellers and an EV Recall: Inside Lordstown Motors’ Decline. Lordstown Motors was once in the race to build America’s first EV pickup truck. After vehicle fires, short seller reports and recalls, the company turned to a reverse stock split to avoid filing for bankruptcy protection but it wasn't enough. Illustration: David Fang

By George Downs

Lordstown Motors Corp. finds itself in hot water as the Securities and Exchange Commission (SEC) has charged them with deceiving investors regarding the sales potential of their flagship electric pickup truck, the Endurance. In a settled order, the SEC revealed that Lordstown had exaggerated the demand for the vehicle by falsely claiming to have received over 100,000 nonbinding "pre-orders" from commercial fleet customers.

However, it turns out that the majority of these pre-orders came from companies that neither operated fleets nor had any intention of purchasing the truck for their own use.

Furthermore, the SEC's investigation uncovered that Lordstown had misrepresented the timeline for delivering the Endurance.

The company failed to factor in production delays, which were partly caused by their inability to access crucial components. This misleading information provided a distorted picture of Lordstown's prospects and misled investors.

“We allege that, in a highly competitive race to deliver the first mass-produced electric pickup truck to the U.S. market, Lordstown oversold true demand for the Endurance,” said Mark Cave, Associate Director of the Division of Enforcement. “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.”

Lordstown was found to have breached various antifraud, proxy, and reporting regulations under federal securities laws. Without acknowledging or refuting the SEC's conclusions, Lordstown has consented to a cease-and-desist directive and repayment of $25.5 million. This amount will be considered settled through payments of up to $25.5 million by Lordstown and other defendants to settle ongoing class action lawsuits.

The SEC took action against Lordstown's former auditor, Clark Schaefer Hackett and Co. (CSH), for providing non-audit services to Lordstown while auditing their financial statements as a private entity. CSH later audited the same financial statements during

Lordstown's merger with the SPAC, violating auditor independence standards. As part of the settlement, CSH agreed to penalties, disgorgement, and undertakings to enhance its policies and procedures. The SEC's investigation, led by Carolyn Winters, Mark Oh, and John Higgins, is still ongoing with support from other team members.

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