It's beyond time for Lordstown Motors (RIDE) to get some real executives in its C-suite and on the board before the whole electric truck experiment truly gets short-circuited.
"To clarify recent remarks by company executives at the Automotive Press Association online media event on June 15, although these vehicle purchase agreements provide us with a significant indicator of demand for the Endurance, these agreements do not represent binding purchase orders or other firm purchase commitments," Lordstown Motors said Thursday in a new filing.
The filing comes a day after Lordstown President Rich Schmidt said at an event the company had firm orders for all of the Endurance electric trucks it intends to build this year and 2022.
"These vehicle purchase agreements generally include a projected buyer order schedule over the three to five year life of the agreement, and may be terminated by either party at will on 30 days’ notice. They do not commit the counter parties to purchase vehicles, but we believe that they provide us with a significant indicator of demand for the Endurance," Thursday's filing explained.
Shares of Lordstown fell nearly 3% on the news. The stock is down 8.8% on the week.
In short, it has been a disastrous week for the upstart electric truck maker — one that only raises concerns on the Street if the company will survive.
Lordstown Motors said Monday that CEO and founder Steve Burns and CFO Julio Rodriguez resigned after a special board committee found pre-order disclosures for the Endurance to be inaccurate. Angela Strand — its lead independent director — assumed the CEO position until a permanent leader is found. Becky Roof — an outside hire with extensive finance function experience — was named interim CFO.
Strand declared at Wednesday's event it was a "new day" for Lordstown. It sure doesn't appear that way.
The executive resignations follow quick on the heels of Lordstown warning in a SEC filing on its ability to continue as a going concern. Lordstown is also a few weeks removed from telling investors it needed cash — fast — if it were to meet its new lowered production targets for its electric truck called the Endurance.
Even with the spate of downright ugly news, there could be several more shoes to drop on Lordstown investors soon.
First, it's unclear what Burns does with his nearly 27% stake in Lordstown. Dumping Lordstown stock could create more selling pressure in the market. It wouldn't be too different than when now ex-Nikola CEO and founder Trevor Milton sold a large slug of stock in April, which put pressure on the stock price. Milton left the company after a critical Hindenburg Research report late in 2020.
"Anticipate technical selling pressure related to potential stock disposals from departing management, particularly Mr Burns who is the single largest shareholder of RIDE with a 26.25% stake as of the amended 10-K filed June 8, 2021 (46.35M shares)," Morgan Stanley auto analyst Adam Jonas said in a note to clients.
The other concern for investors is if permanent management — once solidified — sticks with the signature hub and motor design of the Endurance truck. If they don't, it could prove mighty costly to overhaul.
Explained Jonas, "We continue to believe the biggest issue facing the company is the dependency of the proposition systems in-hub motors. While a change of architecture would add as much as a year or two to the start of production, we believe moving to an alternative motor strategy or an entirely different product and go-to-market strategy altogether may be required to preserve sustainable equity value. It is our understanding that Steve Burns was the primary proponent of the hub motor system."
And finally, there remains the skeletons in Lordstown's closet from Burns that creates a host of unknowns as new management eventually digs in. Consider these factoids: two of the company's board members (Strand and John Rucidlo) have ties (both worked there during Burns' tenure) to Workhorse Group, the trucking company founded by Burns.
Meanwhile, the entire Lordstown board oversaw the creation of its existing mess.
It's likely most of the board will need to be overhauled along with the Burns-created management team. At this point given the existing debacle at Lordstown, investors would probably welcome the installation of new faces for the top 10 executive spots at the company and a complete board refresh.
The alternative to this: more weeks such as this for Lordstown.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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