HOW WE KILLED OFF LORDSTOWN MOTORS
TO PROTECT ELON MUSK
Lordstown is an electric vehicle SPAC
with no revenue and no sellable product, which we believe has misled
investors on both its demand and production capabilities.
The company has consistently pointed
to its book of 100,000 pre-orders as proof of deep demand for its
proposed EV truck. Our conversations with former employees, business
partners and an extensive document review show that the company’s orders
are largely fictitious and used as a prop to raise capital and confer
For example, Lordstown recently
announced a 14,000-truck deal from E Squared Energy, supposedly
representing $735 million in sales. E Squared is based out of a small
residential apartment in Texas that doesn’t operate a vehicle fleet.
Another 1,000-truck, $52.5 million
order comes from a 2-person startup that operates out of a Regus virtual
office with a mailing address at a UPS Store. We spoke with the owner
who acknowledged it won’t actually order any vehicles, instead
describing the “pre-order” as a mere marketing relationship.
Yet another firm that is supposedly
set to buy 500 trucks from Lordstown told us: “…The letters of interest
are non-binding. It’s not like you’d obligate yourself to a pre-order or
that you would contractually bind yourself to buying this truck. That’s
not what they are.”
Lordstown CEO Steve Burns has called
these arrangements “very serious orders”. The actual customer
agreements, which we present for the first time today, require no
deposit and are non-binding. Many of the supposed customers do not
operate fleets nor do many have the means to actually make the stated
Former employees and litigation
records reveal that in order to raise capital and confer credibility,
Steve Burns began paying consultants for every truck pre-order as early
as 2016 while he was serving as CEO at Workhorse.
Later, heading into Lordstown’s
eventual go-public transaction in 2020, a small consulting group called
Climb2Glory was paid to generate pre-orders. Climb2Glory openly
described the purpose behind the pre-order game: “the faster the
pre-orders arrived, the greater investors’ confidence would be in the
company and the faster funds would flow in.”
One company rep that committed to buy
40 trucks through Climb2Glory told us: “…I’m not committed to anything,
not to buying a single vehicle. I committed to consider buying vehicles.
I’d have a lot of questions before I commit to anything.”
Others had similar remarks. “The
commitment of that size (15) is totally impossible,” a representative
for the City of Ravenna told us about its pre-order. We document
numerous other “customers” that disclaim any intent to actually purchase
Multiple former senior employees who
have worked with Lordstown Founder & CEO Steve Burns openly
described him as a “con man”, or a “PT Barnum” figure. One senior
employee told us that, while working with Steve for a couple of years,
they saw more questionable and unethical business practices than they
had seen in their entire career.
Despite being allowed to resign from
Workhorse, former senior employees described how Burns was pushed out of
his old company by the board for wasting R&D money and missing
promised deadlines. He then launched Lordstown months later.
Despite claims that Lordstown will be
producing vehicles by September, a former employee explained how the
company is experiencing delays and making “drastic” design
modifications, putting them an estimated 3-4 years away from production.
For example, in mid-January the company “totally switched from a plastic
exterior to aluminum,” we were told.
Despite claims that battery packs
would be manufactured in-house, we were told that the equipment is
months away from arriving, let alone being put into a production
environment. In the meantime, we were told that battery packs are being
put together by hand.
Former employees also shared that the
company has completed none of its needed testing or validation,
including cold weather testing, durability testing, and Federal Motor
Vehicle Safety Standards (FMVSS) testing required by theNHTSA.
In January 2021, Lordstown’s first
street road test resulted in the vehicle bursting into flames 10 minutes
into the test drive. We share copies of the 911 call and a police report
we received through FOIA requests.
Lordstown only went public in October
2020, but in that brief time, executives and directors have unloaded
~$28 million in stock. We think it bodes poorly when executives unload
stock in a company with no actual product that claims to be on the cusp
We think investors, workers, and the
local community deserve much more transparency on what is going on at
Lordstown. We ask 21 questions at the end of our piece that we think the
company should answer.
After extensive research, we have taken a short position in shares of
Lordstown Motors. This report represents our opinion, and we encourage
every reader to do their own due diligence. Please see our full
disclaimer at the bottom of the report.
Illusion Of Supply And Demand
is one of many SPAC-led electric vehicle companies that has attracted
hordes of retail investors with the lure of exposure to the ongoing EV
with several companies in the space, Lordstown has never produced a
saleable product and has no revenue. [Pg.
32] It has been beset by years of production delays which we expect
will continue, based on evidence we present today.
the lack of a current productsupply,
one of the strongest arguments supporting the company has been the
its proposed all-electric truck, the Lordstown Endurance, which it hopes
will rival the Ford F-150 and other traditional internal combustion engine
fact, just weeks ago, Lordstown CEO Steve Burnsboasted
to Yahoo Financeof having “pre-sold” 100,000
vehicles, representing over $5 billion in future revenue and a huge vote
of confidence from a slew of top-tier fleet customers.
as we will show, that demand appears to be fictitious.
research has revealed that Lordstown’s order book consists of fake or
entirely non-binding orders, from customers that generally do not even
have fleets of vehicles. According to former employees and business
partners, CEO Steve Burns sought to book orders, regardless of quality,
purely as a tool to raise capital and confer legitimacy. In addition, we
show how, in desperation to claim there was demand for the proposed
paid for customers to book valueless, non-binding pre-orders.
detail conversations with Lordstown “customers” who were eager to explain
that the letters of intent (“LOI”s) with the company were “promotional”.
Others assured us they were “not committed to anything” and that the
pre-order commitment size recorded by Lordstown was “totally impossible”.
One CEO at a ‘key’ customer told us our outreach was the first he had
heard of any arrangement with Lordstown.
also show, for the first time, the actual Lordstown pre-order agreements,
which we received from former business partners. While the agreements
entail zero commitment on the part of the “buyer”, they include clauses
about the parties agreeing to work on press releases toannouncethe
the supply side, we have found that Lordstown’s CEO, Steve Burns, has led
the company through dubious ethical territory, hyping unvetted technology
and unrealistic production timelines.
on our conversations with former employees, the company has made extensive
changes to the Endurance prototypes and hasn’t begun the needed testing
& validation for the reworked vehicle. While the company has been
promoting a September 2021 production timeline, former employees estimate
the truck is 3-4 years away from production, if it ever gets there.
also provide new details about a disastrous recent “road test” in which
Lordstown’s Director of Power Train was forced to call 911 after the 2021
Lordstown Endurance he was driving spontaneously combusted and became
“fully engulfed” in flames just 10 minutes after taking to the road. The
truck had cleared internal testing, and this was the Endurance’s very
first road test.
think Lordstown has grossly misled the public about its order book and the
progress of its proposed truck. We raise 21 questions at the end of our
piece that we think investors, workers, and the citizens of Lordstown,
Ohio, deserve answers to.
& CEO Steve Burns Was Described To Us By Former Senior Former
Employees as a “Con Man” and a “PT Barnum” Figure
Chairman and CEO is Steve Burns, who formed the business inJune
2019. This followed his February 2019departurefrom
publicly-traded Workhorse, where he had served as founder and CEO.
part of our research, we interviewed former senior employees of Workhorse
to learn about Burns’ leadership style. All credited him with being the
driving force and “visionary” behind both Workhorse and Lordstown.
were told Burns has a masterful marketing approach, which includes a
cultivated soft-spoken style and use of self-deprecating humor.
these acknowledgements, they also shared that while he excels at
presenting a vision, he lacks the ability to follow through on plans. One
former employee called it “Steve’s magical thinking”.
multiple former senior employees who had worked closely with Burns openly
described him as a “con man,” or a “PT Barnum” figure, referring to thefamous
showmanand circus operator known for promoting
senior employee told us that, while working with Steve for a couple of
years, they saw more questionable and unethical business practices than
they had seen over their entire career.
Burns Was Pushed Out
of Workhorse By The Board Due to His Inability To Focus And Execute
Projects, According to Former Employees
to resignin February 2019, Burns was pushed out
by the board for wasting R&D money and missing deadlines, former
senior employees of Workhorse told us. The board believed the company
needed to focus on building trucks while Burns was distracted withHorsefly(its
drone program) and other pet projects, according to the employees.
for several months as a consultant on the drone program following his
Burns out, Workhorse essentially jettisoned its pickup truck project,
choosing instead to focus on its core business of vans and last-mile
delivery systems, according to a later interview with EV industry
Lordstown 4 Months Later With Little More Than Meaningless Pre-Orders
(More on this Later) and Designs
was formed by Burns about 4 months after his ouster from Workhorse, inJune
2019. By November, Lordstown had alreadyentered
into an agreementwith Workhorse to purchase
intellectual property relating to the now-renamed Endurance truck.
to a former senior technology employee of Workhorse, virtually zero
intellectual property was actually shared with Lordstown, aside from
designs, and abookof
pre-orders, which Burns has described as “sales”.
didn’t have much technology to share in the first place; it had fewer than
10 patents, and, of those, only 2 referenced electric vehicles. [1,2]
According to the same former employee, the lack of patents by Workhorse
was simply due to the technology not being advanced enough to warrant
The New Company
Quickly Bought a Closed GM Plant, Giving Hope to the Hard-Hit Local
Community and Scoring a Political Win With Then-President Trump
November 2018, GMannouncedit
would be closing its plant in Lordstown, Ohio, ultimately eliminating4,200
jobs. The planned closure in battleground-state Ohio created
political ripples all the way up to the President, whotweetedaggressively
at GM about the decision.
October 2019, GM made itofficial;
the plant would formally close.
stepped Steve Burns and Lordstown, with a plan that was storybook perfect.
The company would hire as many workers as GM had and would repurpose the
factory to make electric trucks, bringing the hard-hit local community
into the next chapter of the auto industry.
2019, Lordstown inked a deal tobuyan
old GM plant with a $40 million loan from GM.
deal was viewed as potential salvation for the local economy and was
welcomed by politicians at the local, state and federal level. This slice
of the Rust Belt along the Mahoning Valley, with soaring unemployment, was
Valley”, as the communities placed their hope in an electrification-driven
President Mike Pence attended the June 2020unveilingof
the Endurance prototype, taking the opportunity to promote the
administration’s record on jobs.
the unveiling, Pence drove up on stage in the prototype with Burns. The
event went off without incident, but a former employee described how the
team was “cringing”, saying “that was just more of a show vehicle” with
safety concerns. (Six months later, an Endurance prototype burst into
flames within 10 minutes of its first road test.)
a Lordstown Enduranceprototype against the
backdrop of the White House on September 28, 2020, just one day before the
first presidential debate, which took place in Cleveland, Ohio. He hailed
the truck’s technology as an “incredible concept” and praised Lordstown
for creating potential new jobs.
Part I: Lordstown’s
Order Book Looks To Be Almost Entirely Fake And/Or Non-Binding,
Representing No Genuine Demand
its large order book is a key investment highlight, underscoring deep
demand for the company’s products, which have yet to be produced or sold.
an interview onYahoo
Financeon February 23rd,
2021, CEO Steve Burns focused on this point, declaring:
“We have pre-sold
100,000 of these vehicles to various fleets across America — really a
focuses on selling to fleets, which are typicallydefinedas
“businesses that have purchased 5 vehicles in a year or have 15 total
units in operation.”
has regularly touted the pre-sold fleet trucks to the media and in
releases. For example, when Jim Cramer pressed Burns about the
commitment represented by these orders,Burns referred to them as “very
eventwith Mike Pence, Burns said“We
have our whole year, our first year of production already pre-sold.”
put together abrief
videopresenting several other public statements
by Steve Burns about the strength of the company’s order book.
to those claims, our research has found that Lordstown’s fleet truck
“orders” are a mirage, and instead:
Require $0 as a reservation payment.
Do not require an actual purchase.
Are from customers that generally DO
NOT operate fleets.
Are from customers that often DO NOT
have the means to make the purchases.
Include a clause encouraging a press
release to announce the deal.
S-1 filing discusses the non-binding nature of its pre-order book, but
does not disclaimany
risks associated with whether or not such businesses even have the means
to make such purchases, or whether the businesses would have
any credible demand for vehicles. [Pg.
the contrary, the company states in its legaldis-claimer,that
it “is focused on building relationships with large fleet customers”. [Pg.
8] The company has never provided the specific language of its
pre-order agreements, but we received acopyfrom
a former employee:
the goal behind generating pre-orders is to capture actual product demand.
But a Lordstown partner that helped generate pre-ordersacknowledgedthat
the goal was to boost investor confidence in order to raise capital:
was directly linked to pre-order generation — the faster the pre-orders
arrived, the greater investors’ confidence would be in the company and
the faster funds would flow in.”
company’s recent January 2021investor
deckhas reiterated the order book claim as a key
some electric vehicle manufacturers, like Tesla, have beencollectingdepositsfor
new vehicle reservations for years. Even Nikola managed to collectdepositsfor
its imaginary Badger truck.
by contrast, has resorted at times topayingfor
non-binding pre-orders, then using the fictitious demand to fuel financing
rounds and to confer an aura of credibility on the company.
spoke to two former sales reps that helped gather the “pre-orders” for the
Lordstown Endurance and for its predecessor, the Workhorse W-15. They
acknowledged the “pre-orders” they collected represented “no commitment at
all”. One told us:
are soft orders, they’re absolutely. It’s not a firm commitment it’s
“let’s take a look at it and we’ll decide then”. But they do have a
lot…I’ve no idea if that’s a fabrication or an exaggeration or the real
deal. But I know some of the people who have those orders and they are
not firm orders, they are soft orders.”
right to have some apprehension. I think the way it’s being communicated
especially to the media is probably not accurate. Everywhere I read is
pre-orders, pre-orders, pre-orders.There’s no such thing as a preorder.
What they’re doing is getting letters of intent and there is no
commitment whatsoever.I could commit
to 100,000 pre-orders or reservations but I have no commitment, no
financial commitment, no nothing…I hope they can get all 100,000 of them
but I think that’s extraordinarily unlikely.”
E Squared Energy: A
$735 Million Deal For 14,000 Trucks From an Entity Run Out of a Small
Apartment in Texas
massive 14,000 truck deal with E Squared Energy, representing almost 17.5%
of its 80,000 total truck pre-orders at the time. Given the proposed base
price of $52,500, the deal represents $735 million in demand. [Pg.
the size of the order, one might imagine E Squared to be a large
enterprise with ample assets.
Lordstown press release identified the principal of E Squared as Tim
Grosse. In hisLinkedIn
profile, Grosse identifies himself as a “transformational leader in
clean energy”, but we see that E Squared has only2
employees: Grosse, along withanother
individualwho self-identifies as a retired
freelance energy consultant.
on E Squared Energy is not found through typical Texas corporate records
as it’s not a registered corporation. It’s a DBA, anindividualthat
name, registered in Denton County Texas.
E Squared list its registered address as 4800 Printers Way #3029.
address appears to be Tim Grosse’sapartmentin
a building where apartmentson
the same floorrent for a modest $1,023-$1,080 per
this pre-order from E Squared was placed out of Tim Grosse’s apartment, itrepresented17.5%
of Lordstown’s total order book.
E Squared does not name a single executive and indicates that it is
focused on advising companies on cutting energy costs through energy
audits, LED lighting, and other power-saving means. We found no indication
that E Squared has a fleet of trucks or even focuses on the electric
vehicle space, aside from its non-binding deal with Lordstown.
spoke with Grosse to learn more about the arrangement. When we asked
whether E Squared operates a fleet, Grosse responded with a rather
“We don’t operate a
fleets. It’s kind of a hybrid of a lease but it’snota
lease. That’s the closest thing to describe it as that people are
further, he accepted that E Squared had only worked in the building sector
a brand-new program we’re offering. We’ve primarily been in the building
sector we’ve worked a lot of large companies and technologies…various
asked what the 14,000-truck number was based on, if anything, and were
told it was an “estimate” based on Lordstown’s planned production, not
driven by actual customer demand:
based primarily on the output of Lordstown. In the first year they’ll be
somewhat limited with only 20,000 vehicles and we have 2,000 on the LOI
and second year we have 4,000 and production will be about 40,000. And
the third year we’re ramping up to 8,000…That’s what we’re estimating.”
Innervations LLC: A
$52.5 Million, 1,000 Truck Order From a 2-Person Startup With No
Apparent Assets, Based Out of a Regus Virtual Office
April 7, 2020, in the months leading up to Lordstown’s IPO transaction,
1,000-truck, ~$52.5 million order, from a company called Innervations LLC.
At the time, it represented the largest ever “order” for Lordstown, not
including orders brought over from Workhorse. It represented ~13% of the
total order book and ~34% of the order book for the new Lordstown
Endurance truck, according to a former employee we spoke with.
is a Florida entity that was formed about 4 months prior to the
announcement, according to Floridacorporate
records. The entity lists its main office address as aRegus
Virtual Officeand its mailing address at theUPS
Storein Hernando, Florida.
does not actually seem to have a fleet of its own, but itswebsiteclaims
to offer “Fleet services” which apparently include selling Lordstown
trucks. It is described as a “startup brought up by two like-minded
individuals” by theguy
that built its website.
two individuals, listed on Innervationscorporate
documents, are John Pilz and David Hein. Pilz graduated from law
school in 2018 and works full time as an attorney at a localsoftware
company, per hisLinkedInprofile.
currently works full time at anarchitecture
design firm, per hisLinkedInprofile,
but regularly makes bullish posts about Lordstown and other EV companies
Hein also runs a contracting company that appears to be based out of his
residence, a 468 sq/ft 2 bedroom / 1 bath thatZillow
estimatesis worth about $187,000.
“We Don’t Get Involved
With The Actual Ordering”: Innervations’ CEO Acknowledges It has No
Plans to Actually Purchase the Vehicles
We spoke with David
Hein, who explained that Innervations has no plans to actually purchase
the vehicles, instead describing his role as merely that of a
we do is we host and support events with companies and then we invite
Lordstown Motors to the event to show the product. We just direct the
company to Lordstown directly. When they tell us they’re interested in
purchasing trucks that’s what we do.We don’t get involved in the actual
who operates the InnervationsFacebookaccount,
which currently boasts 30 followers and is linked to a Gmail address,
described his role as being that of an “influencer”:
influencers, our numbers, that’s a very small number but what
Innervations does is we promote the product…We think we can influence.
Remember, we don’t sell the truck, we just influence companies, and it’s
more on a broader spectrum.”
find it unlikely that the recent college grad (Pilz) and the EV enthusiast
(Hein), who appear to operate Innervations as a side hustle, have a
credible plan to influence the purchase of $52.5 million worth of trucks
from customers that don’t yet seem to exist.
Another 500 Truck
“Order” That is Really Just A Promoter Agreement: Clean Fuels Ohio
March 2020, Clean Fuels Ohioreportedlyagreed
to buy 500 trucks from Lordstown.
news was reported despiteClean
Fuelsactually operating as a non-profit and
merely agreeing to help educate fleet operators around Ohio to encourage
purchases of the trucks. We spoke with Sam Spofforth, Executive Director
of Clean Fuels Ohio who agreed with that characterization.
“It is really that,
promotional and getting the word out. And when we signed
those letters of intent, we were really clear with them that that’s what
we would be doing, and they understood that and welcomed that.”
letters of interest are non-binding. It’s not like you’d obligate
yourself to a pre-order or that you would contractually bind yourself to
buying this truck. That’s not what they are.”
Under Steve Burns’ Leadership Struggled to Find Enough Orders, So It
Began Paying $30 Per Non-Binding “Order” As Early as 2016
the need for continued high-impact “order” announcements to raise capital
and confer credibility, Steve Burns began paying consultants per truck for
pre-orders as early as 2016 while he was serving as CEO at Workhorse.
by one such consultant, the company was paying $30 per each no commitment,
$0 money down, non-binding LOI, aka “orders.”
lawsuit reveals that several orders Lordstown identifies as “key”,
including Duke Energy, Ryder and Clean Fuels Ohio were solicited through
By 2020, Desperate to
Report More Orders in the Run Up to its Go-Public Transaction, Lordstown
Began Paying $50 For Each Zero-Commitment Order
early 2020, with a go-public transaction on the horizon, former employees
told us that CEO Steve Burns was desperate to increase the number of
pre-orders, regardless of quality. At the time, former employees described
how Burns wanted to get to 10,000 pre-orders in order to secure better
consulting group Climb2Glory, which was to receive$50 per truck
pre-order, according to former employees. Climb2Glory boasts on
it was key in helping Lordstown generate pre-orders faster in order to use
the orders as a capital raising tool.
managing partner Pat Mangin reiterated that in a phone interview:
of the letters of intent from Climb2Glory and some marketing, Diamond
Group came to the table and they did the reverse merger. So our role was
to help influence and acquire interest that would lead to investment.
That was Climb2Glory’s role.”
explained that initially Climb2Glory represented the Endurance for
“contract dollars” but later took a stake in the company:
“We did get a
significant amount of shares in the dealso
what we do now is we still leverage our network.”
Association: “I’m Not Committed to Anything”
reached one customer signed up by Climb2Glory who suggested they would not
have considered themselves customers of Lordstown at all.
Lah, CEO of Catholic Cemeteries Association, had pre-orders for 40
vehicles through Climb2Glory, according to a former employee. Per our
conversation with him:
“…I’m not committed to
anything, not to buying a single vehicle. I committed toconsiderbuying
vehicles. I’d have a lot of questions before I commit to anything. The
way it was written I was very careful because I’m an attorney. I wasn’t
going to commit us to buying but the guy from Climb2Glory said it was
just to give us an idea of the potential market…”
Pre-Orders, Including a 250-Truck Order From A Customer Subsequently
Engulfed in a Bribery Scandal, Appear Similarly Meaningless
has provided scant detail about its pre-order customers, but a Sept 17,
presentationintroduced additional supposed
key customers show a pattern of being small companies that generally don’t
own or operate fleets. Often, they are just local Ohio based car
dealerships or leasing services.
First Energy –An
Ohio nuclear power company made infamous for a $61 millionbribery
scheme, resulting in the arrest of the Ohio house speaker and 4
others in mid-2020. Lordstownannouncedthe
250-truck deal just months earlier. The Lordstown dealannouncementquotedDennis
Chack, one of the First Energy executives subsequentlyfiredover
the bribery scandal.
Momentum Groups –An
Ohio vehicle reseller that doesn’t seem to operate a fleet yet placed a900
truck“order”. Momentum has awebsitededicated
to trying to find actual customers for the Endurance.
us it’s really just a look-see I don’t know enough about them to make an
honest…We want to evaluate them on their merits…A friend of a friend is
involved in [Lordstown] and asked us if we would consider it and we said
we would and we are not locked in” –William
Kinney, Summit Petroleum – President
Mike Albert Fleet
2021order announcement didn’t disclose the number
but referred to it as “significant”. It was the only order announced in a
month when the order book jumped from 80,000 to 100,000 vehicles.
asked about the relationship between Lordstown Motors and Mike Albert
Fleet Solutions, Mike Albert indicated that this “pre-order” deal was
actually a referral arrangement:
(Lordstown) are an Ohio-based company and so are we (Mike Albert Fleet
Solutions) and I have a personal relationship with some of the business
development executives that are there. And we go out and talk to the
same people and so they’re talking to fleets and I’m talking to fleets.We
refer business introductions and opportunities to each other.”
Shadoin– Director of Sales – Mike Albert Fleet
‘key’ customer is acloud
services companyfor utilities, based on the
matching name and logo for Grid-X in Lordstown’s presentation. It appears
to own zero fleet trucks, according toDepartment
of Transportationrecords. We were unable to
identify who at Grid-X may have signed an agreement. Its CEO,Jian
don’t know anything about LMC or Lordstown Endurance pick-up...Not
sure I am the right person to talk to.”
“We are completely
unaware of this.I heard of them from your
inquiry message the first time.”
Lordstown’s smaller supposed customers told us the order size Lordstown
recorded for them is not feasible.
spoke with Frank Seman, mayor of the City of Ravenna, which had pre-orders
of 15 vehicles per Lordstown documents we reviewed. Per our conversation
with him he wrote a letter out of hope that the support would help job
growth in the local community:
was asked to write a letter of support to help get the plant repurposed
and reopened to help provide more jobs for residents of Northeast
Ohio. While we have an interest in the plant’s success and this
did not commit to the purchase of any vehicles. We are a
small town. The commitment of that size is totally impossible.”
is just 20 miles west of Lordstown and as they state, city authorities
have a strong desire to get thousands of autoworkers back into employment.
same is true in the City of Kent, 25 miles west of Lordstown. City Manager
Dave Ruller said Kent could potentially be in the market for 3 or 4 trucks
subject to a formal bidding process – not the 15 recorded by Lordstown as
pre-orders. He told us:
were happy to write that letter to show our support —and to help them
finalize all their production financing—knowing
that it is not an official bid document or purchase order so it is
not legally binding us to buy somethingthat
hasn’t even been produced yet beyond a prototype.”
Ryder And Duke Energy Orders For 2,500 & 500 Trucks Were Mere
“Favors to the CEO”, According to Former Employees
November 2016, electricity company Duke Energy entered aletter
of intentto buy 500 trucks (representing ~$23
million in potential revenue) from Workhorse, the predecessor owner of
what is now the Lordstown Endurance. The vote of confidence from the large
NYSE-traded electricity company provided credibility to the fledgling
deal for 2,500 trucks from fleet management giant Ryder, representing
about $130 million in potential sales. Per anarticleat
the time, Steven Burns declared:
have enough pre-orders now to justify pulling the trigger and making a
march toward production.”
the big claims, former employees told us the deals were essentially for
show and done as a favor to CEO Steve Burns in order to aid in the capital
publicly disclosed in a2018
interviewthat they were primarily “supporting
Workhorse with a maintenance & service program.” Steve burns recentlypromisedthose
same service rights to a different company, Camping World.
received a copy of the Duke letter of intent from a former employee, which
reveals for the first time how loose the deal was. The deal made
explicitly clear that Duke had zero obligation whatsoever.
the time, it was expected that the trucks would beproduced
by 2018. That date has come and gone.
a phone conversation, Duke Energy media spokesman Randy Wheeless clarified
want to see the truck and kick the tires before we buy that many. We
want to see that it’s pretty durable, rugged and has a good range and
heavy duty. We’re in some rugged areas especially in storms with trees
down and areas a little hard to access.”
told, we found zero binding orders or genuine signs of commitment in
Lordstown’s order book.
Part 2: Production
Overpromises And Tech Issues
The Endurance (And its
Predecessor) Have Consistently Been Beset With Delays.
Burns Has Been Late On
Production Promises By 3 Years and Counting
has yet to sell a truck.
targets are therefore essential for modeling its future revenue potential.
Production delays aren’t uncommon among new companies, but Burns has
distinguished himself by consistently promising very near-term mass
production, often within 6-12 months, then repeatedly missing those
In May 2017, the truck (under its
predecessor name and ownership by Workhorse) wassaid
to beready for production in early 2018.
February 2019, Steve Burns was pushed out of Workhorse by the board,
according to former employees.
the truck then moved over to Lordstown and rebranded as the “Endurance”,
the company explained that changes would be made to the planned vehicle.
It then commenced announcing aggressive production targets that it
continues to miss. While some of the delay can be chalked up to covid,
several revised and missed targets were made mid-pandemic.
“Fully Engulfed”: The
Lordstown Endurance Prototype Spontaneously Burst Into Flames 10 Minutes
Into Its First Road Test In January 2021
progress toward production has been lumpy. On January 13, 2021,
Lordstown’s Director of Power Train called 911 in Michigan to report that
his vehicle was on fire, according to copies of the 911 call and apolice
reportwe received through FOIA requests.
employee noted on the scene that the vehicle was a 2021 Lordstown
Endurance that had cleared testing inside the facility, and that it was
the first road test for the electric truck, according to a localmedia
noticed it was “driving weird”. Within 10 minutes the Lordstown truck
burst into flames.
weeks after its very first Endurance test truck burst into flames,
it would begin building beta trucks in a month.
asked about the immolation of its test vehicle, Lordstownacknowledgedabout
a month later that it did have “an event’, stating that “we do not
generally comment on individual testing conditions.”
Lordstown’s Hub Motor
Technology, Core to its Vehicle’s Success, Is Licensed From A Tiny
Slovenian Company That Former Employees Said Burns Went With Because it
prototype issues may stem from its selection of critical parts.
company’s website features its “revolutionary” In-Wheel Drive System,
which utilizes motors within its wheels.
a small company based in Slovenia that has raised only €15.3 million in
funding in its 15-year history, according toCrunchBase.
former employee of Elaphe said that funding for the company had dried up
by the end of 2019, leading to a round of lay-offs:
were) money issues at the time. Yeah, no money no investments. They
obviously resolved shortly (after) because the project with U.S. came
May 2020, Elaphe and Lordstownannouncedan
exclusive licensing agreement. The deal came right in time, according to
the former employee, and enabled Elaphe toraise€4.2
million in September.
mentioned Elaphe’s lack of funding to an employee at competitorProtean,
a company that also develops hub motor technology, who simply replied “it
is an expensive business”. They explained that OEMs can spendhalf
a billionon new projects just to test
former senior employee at Workhorse who worked on the technology agreed
and provided more color. He explained that Lordstown was promised a
“crazy” price from the group in Slovenia, which is what attracted Burns’
not come down on price, according to the former Workhorse employee. Its
technology had been far more extensively tested and integrated into other
autos, the former employee said.
Hub Motor Technology
Has Never Been Commercialized At Scale In the Light Vehicle Market,
Posing Major Technical Challenges, According to Analysts and Industry
hub-motor technology is indeed different, but, according to analysts and a
former senior employee at Workhorse who worked on the technology side of
the company, there are reasons why it hasn’t seen adoption.
Stanley analyst Adam Jonas, who has been an optimist on the EV space,
placed an underweight rating on Lordstown in February this year, largely
due to its choice in technology, writing:
radical new hub-motor technology (licensed from Elaphe of Slovenia)
has never been commercialized at scale in the light vehicle market.
In our opinion, it’s a good concept, but following a series of channel
checks on the propulsion tech,we
believe investors would be exposed to significantly elevated execution
former senior Workhorse employee also explained that hub motors are
susceptible to durability issues because hub motors are considered “unsprung
weight”, or components not supported by a vehicle’s suspension
system. (These “unsprung” components also include wheels, tires and
brakes, which sit below the suspension and travel up and down with bumps
and potholes as they try to follow the contours of the road.)
that motors are typically supported by suspension, hub motors based in the
wheels do not receive that protection, resulting in durability issues. We
were told that a basic curb strike can break the axle and the motor. Any
off-roading can also cause issues with liquids or debris creating
Elaphe’s CEO Gorazd Lampic believes they have solved technical
limitations, he recognizes hub motors have never been mass produced.
has built some motors in Slovenia and others on a purpose-built assembly
line in Hangzhou, China as part of a joint venture with parts manufacturer
APG. A former employee said it took 12-months to build that line.
under the licensing deal, Lordstown will build the motors for the
Endurance in-house with “some support from Europe”, according to Lampic.
regard to future capacity for the production of Elaphe in-wheel motors
globally, Lampic told us:
the processes we’re developing are for 100,000 units per year. But we
don’t have all the processes up and running, so we’re far from that
number in terms of real quantity we produce.”
declined to give details about progress on building the hub motor assembly
line at Lordstown. But if it plans to build a modest 20,000 Endurance
trucks in the first full year that will require 80,000 motors, assuming
an untested production rate.
investors are banking on an unvetted technology in a brand-new application
on a scale that has never been achieved. All of this poses clear
Production Target: September 2021
Former Employee: Maybe
3-4 Years, If Ever. “Drastic” Recent Changes Have Been Made to
Prototypes And None of the Testing And Validation Has Been Completed
Steve Burns has been saying that the company plans to begin production in
September of this year, a mere 6 months away, and that the company plans
to have 3,000 trucks on U.S. roads byyear-end.
Aside from staking that bold target, few details have been provided on
actual progress toward that goal.
spoke with a former employee who was intimately familiar with the path
explained that Lordstown has built fewer than 10 prototypes thus far,
and that the company is still making extensive modifications.
example, in mid-January, the company “totally switched from a plastic
exterior to aluminum” in order to reduce weight. The former employee
called the change “drastic” and suggested that the entirely new frames
would essentially restart any testing and validation process.
former employee also explained that Lordstown had not completed any of its
required testing and validation, including:
Cold weather testing, which typically
takes about 3 months and had not begun.
A “million mile” test or similar
durability test done by major automakers. Per the former employee, “This
doesn’t even have 1,000 miles of testing right now, let alone a
million.” Typically, such durability testing requires 6 months of 24/7
testing, per the same employee.
Major testing required for the Federal
Motor Vehicle Safety Standards (FMVSS) by theNHTSA.
senior UAW union leader, who worked for decades at the Lordstown plant for
GM, also believes production of the Endurance is lagging way behind the
know they’re way behind. If nothing else went wrong the Covid threw them
way behind…They can’t fire up the old machines. Some of them they can.
But everything else has to be reprogrammed and some of it has to be
videoposted by Lordstown in late February 2021 of
an Endurance body being assembled by 4 robots, only one of which generated
any sparks, the union leader, basing his opinion on 40 years working for
not ready. It is not ready. They showed some stuff on TV in the body
shop with the robots that do the welding. But if you never worked in a
body shop you didn’t realize they weren’t working. They were moving but
not welding. There were no sparks.”
Steve Burns: We Will
Make All Battery Packs In-House
“There’s No Battery Pack Manufacturing Equipment On Site There Now. They
Just Put It Together By Hand.”
December 2019, CEO Steve Burns advanced a bold plan to bring all the
battery pack production for Lordstown vehicles in-house. Per anarticleat
“We are building our own battery pack line inside the plant.”
these plans, however, a former employee explained that all the battery
packs are being put together by hand. The company recently ordered
equipment to manufacture battery packs, but delivery is expected to take
25-30 weeks (5-7 months), not including installation, testing, and getting
the equipment into production.
investorsthat batteries are “the secret sauce of
an electric OEM”, yet despite spending a decade in the EV industry,
neither Lordstown or Workhorse had anybattery
specific patentsto show for it.
employees that worked with Steve told us that Steve hoped to rely on
patentsfrom the Model 3 and slightly change them
to fit a truck, but that it was not feasible in practice.
this, Burns hasclaimedthat
Lordstown’s battery packs are better than what Tesla can currently
produce, suggesting that Lordstown is able to just use Tesla’s Model 3
packs and “tweak it, make a little bit better” and then add some “secret magic”.
So far, we have seen no evidence that any of this has happened.
Steve Burns: We Will
License The Motor Technology And Produce The Motors In-House
“They’re Buying Them Direct From the Production Source (Elaphe)”
it intends to construct its hub motors in-house using licensed technology
from Slovenian company Elaphe. But according to the former employee, this
hasn’t happened yet. Instead, the company is still buying motors directly
from the manufacturer.
was unclear when the company plans to start making motors in-house, let
alone on a scale capable of supporting mass-production.
the technology risks associated with the motors, it would clearly be
important to actually produce at least a single motor in order to begin
the extensive testing needed to determine whether it can work and last in
a consumer-ready vehicle.
Lordstown Was Sued
Over Allegations That It Faked Interest In Licensing Third-Party
Infotainment Software, Then Poached the Company’s Employees And Stole
Its Designs Instead
has very little intellectual property of its own, and generally licenses
outside technology or outsources key components.
approach requires less up-front R&D capital but can result in
compressed profit margins and a general loss of control over its
manufactured and outsourced components.
pitfalls aside, one of the key elements of the truck that Lordstown claims
to develop in-house is its infotainment system. [Pg.
172] But that claim is currently being contested in the California
Karma automotive, a California electric vehicle manufacturer, alleges in
detail how Lordstown entered into an NDA to perform due diligence on
licensing Karma’s infotainment system, then stole the technology instead.
complaint contains emails showing how Lordstown secretly hired employees
of Karma, sometimes while they were still employed at the firm. Karma
alleges that Lordstown then encouraged the duplicitous employees to steal
thousands of documents via USB flash drive, which they used to launch a
new Lordstown California office focused on building the infotainment
The Lawsuit Shows That
Lordstown Accidentally Emailed the Supplier A Cost/Benefit Analysis of
Licensing the Technology Legitimately Versus Stealing It And Poaching
The Employees Instead
apparently made its intentions extremely obvious when it accidentally
emailed one of the poached Karma employees on his work email with a
cost/benefit analysis of licensing the technology from Karma versus
misappropriating it and setting up a new Lordstown California office
accidental email helpfully calculated the potential lost revenue to Karma,
a useful component of determining any liability and damages.
complaint also shares how Karma employees emailed confidential files to
their personal computers, a violation of company policy, as they were
being poached by Lordstown.
from the potential liability associated with the complaint, it underscores
an approach to business that is similarly unethical and sloppy. If
Lordstown is comfortable misappropriating technology through obvious acts
of deception, should investors think themselves spared the same fate?
The Lack of a Single
Product Sale Hasn’t Stopped Insiders From Selling ~$28 Million in Stock
in 4 Months Through Open Market Sales
do not think it bodes well when executives unload stock in a company that
claims to be on the cusp of production and revenue.
only went public inOctober
2020, but in that brief time, executives and directors have unloaded
~$28 million in stock despite having no actual product. These sales are
driven in significant part by the company’s core engineering team:
prototype fire took place on January 13th,
but was only revealed publicly on February 10th.
Lordstown executives sold $8.8 million in stock through open market sales
in that time frame before the public knew about the fire.
Workers, And The Local Community Deserve Answers On What Is Going On At
Lordstown. We Have 21 Questions For the Company
key thread we experienced through our research was hope. Even the most
skeptical workers and partners of Lordstown often still held hope that the
company would somehow make it happen, despite the obvious, given how hard
the local community has fared as of late.
don’t think Lordstown Motors has been transparent. These questions are an
opportunity to clear the air and show the local community, investors, and
the public that the hope placed in Steve Burns has been justified:
Lordstown announced a 14,000-truck
order from E Squared Energy, representing $735 million in potential
sales. We found that E Squared is based out of a small apartment in
Texas that doesn’t operate a fleet. How do you explain this, and how do
you explain calling this a “pre-order” when there is no end customer?
Lordstown announced a $52.5 million,
1,000-truck order from Innervations, LLC. We found that the entity is
based out of a Regus Virtual Office with a UPS store mailbox. The CEO of
the apparently 2-man operation described his role as being that of a
promoter. How do you explain this, and how do you explain calling this a
“pre-order” when there is no end customer?
When we contacted the CEO of supposed
key customer Grid-X, he had no idea the company was considered a
customer of Lordstown. Can you explain who at Grid-X signed the
agreement, apparently without the knowledge of Grid-X senior management?
Does Lordstown have anybindingcommitments
customers to purchase any trucks? If so, how many/much?
What percentage of your “pre-order”
book is from customers that don’t operate fleets?
Why was Lordstown paying $30-$50 to
collect non-binding pre-orders of virtually no substance?
Lordstown’s marketing partner
explained that “fundraising was directly linked to pre-order generation”
in order to increase investor “confidence”. How do you respond?
Lordstown (and predecessor Workhorse)
have previously claimed to be 6-12 months away from production targets
for years. Why should investors believe this time will be different?
The police report describing the
immolation of the first Lordstown test vehicle stated that the model had
passed all internal testing before being taken on the road.If that is the case,
why did the vehicle incinerate itself within 10 minutes of being
driven on actual roads?
Why did Lordstown license its critical
motor technology from a tiny Slovenian company, Elaphe? Have the motors
ever been successfully implemented on any commercial trucks currently in
production or driven by end customers?
Former employees described that
Lordstown has completed no major testing and validation of the
prototypes. What progress has Lordstown made on cold weather testing?
How about a million-mile test or
similar durability testing?
How many miles of actual road testing
has Lordstown completed to date?
Former employees described how
third-party parts need to be tested by companies like ZF/TRW. Which of
these parts need to be tested and what has the progress been on these
tests to date?
A former employee explained that
Lordstown hasn’t completed any Federal Motor Vehicle Safety Standards
(FMVSS) tests required by the NHTSA. How do you respond? Have these
tests begun, and will you provide thorough detail on progress to date?
A former employee stated that
Lordstown switched from plastic frames to aluminum frames early this
year, a “drastic” change that would essentially reset any testing or
validation. Did this change happen, and if so, did you expect this
wouldn’t affect testing and production timelines?
The company has said previously that
it would make all battery packs in-house. A former employee said the
equipment to manufacture battery packs is months away from arrival and
that battery packs are currently all being made by hand. How do you
The company has said it intends to
make all hub motors in-house using licensed technology. How many hub
motors have been made in-house to date? How many have been purchased
directly from Elaphe?
Karma automotive sued Lordstown,
alleging the company poached its employees and proprietary infotainment
system. The lawsuit includes an email sent by Lordstown showing a
cost/benefit analysis of misappropriating the capabilities versus
licensing them. How do you respond?
Former employees have said that
Lordstown is 3-4 years away from production, if ever. Aside from a
high-level goal, will you provide a clear timeline of steps needed to
get the Endurance to production by September from a testing, validation,
and factory tooling perspective?
Why have insiders sold ~$28 million in
stock despite there being no product and the company claiming to be on
the cusp of full production?
Disclosure: We are
short shares of Lordstown Motors Corp. (NASDAQ:RIDE)
Appendix A:Background on Steve
upstart auto companies rely heavily on engineering leadership (think Tesla
or Rivian) given the intensity of launching brand new OEMs in the
competitive arena of cutting-edge tech.
found that Burns’ legacy seemed to be that of a dealmaker focused on a
variety of small software companies, with no significant scientific or
automotive credentials prior to his roles at Workhorse and Lordstown.
has been described inmediaand
personal publications as having gone to Ohio State University and earning
a degree in electrical engineering or as a “graduate” of Ohio State. [Pg.
reports have been imprecise. Our review of college enrollment records show
that Burns attended OSU for6.5
his college experience, Burns launched a variety of startups with a record
of several modest successes and failures. All appeared to be companies
that developed software without any direct relation to the auto industry,
let alone manufacturing or advanced hardware development:
a computer program that allowed real estate advertisers to track
newspaper ads. It was formed in1991and
sold 3 years later toGannett
Cofor an unknown amount.
PocketScript, a provider of electronic
prescription software, which was formed in 1999 andsoldin
2003 for ~$1.5 million.
AskMeNow, a search engine thatlaunchedin
2005 and traded as an OTC stock until it wentdefunctin
MobileVoiceControl, a provider of
next year for unspecified terms.
iTookThisOnMyPhone, a photo storage
2007 that wentdefunctin
2010, Burns launched the predecessor entity that would then become
Workhorse, which he ran until his resignation in 2019.