SEC Charges Lordstown Motors with Misleading Investors Regarding Flagship Electric Vehicle
Washington D.C., Feb. 29, 2024 —The Securities and Exchange Commission (SEC) has taken action against Lordstown Motors Corp., alleging that the company misled investors regarding the sales prospects of its flagship electric pickup truck, the Endurance. Lordstown, which underwent bankruptcy proceedings in 2023, entered the public sphere through a merger with a special purpose acquisition company (SPAC) in 2020.
Allegations of Misrepresentation
The SEC’s investigation concluded that Lordstown overstated the demand for the Endurance. The company claimed to have received over 100,000 nonbinding “pre-orders” from commercial fleet customers. However, it was revealed that many of these pre-orders originated from entities not engaged in fleet operations or with no intention of purchasing the truck for their own use. Furthermore, Lordstown misrepresented the timeline for delivering the Endurance, failing to address production delays exacerbated by difficulties in accessing critical components.
Impact on Investors
Mark Cave, Associate Director of the Division of Enforcement, stated, “In a fiercely competitive race to introduce the first mass-produced electric pickup truck to the U.S. market, Lordstown oversold the true demand for the Endurance.” Such exaggerations distort the capital markets, hindering investors’ ability to make well-informed decisions about their investments.
Violations and Settlement
The SEC found Lordstown in violation of antifraud, proxy, and reporting provisions of federal securities laws. Without admitting or denying the SEC’s findings, Lordstown consented to a cease-and-desist order and agreed to disgorge $25.5 million. This sum will be deemed satisfied through payments of up to $25.5 million by Lordstown and other defendants to resolve certain class actions against them.
Action Against Former Auditor
Additionally, the SEC initiated an administrative proceeding against Lordstown’s former auditor, Clark Schaefer Hackett and Co. (CSH). CSH provided non-audit services to Lordstown, including bookkeeping and financial statement services, while auditing the company’s financial statements as a private entity. This dual role violated auditor independence standards set forth by the SEC and the Public Company Accounting Oversight Board.
The attorneys at Sallah Astarita & Cox, LLC are former SEC Staff Attorneys and brokerage firm counsel, with over 100 years of collective experience. If you have received a subpoena from the SEC, a document request from FINRA, or have a dispute with a brokerage firm, call 212-509-6544 for a free consultation. The firm represents investors and financial professionals nationwide.
