(Bloomberg) — Lordstown Motors Corp. posted its biggest two-day decline since October after the electric-vehicle startup said its current level of cash may not be sufficient for it to stay in business.

The shares doubled last year as investors dazzled by Tesla Inc.’s gains sought the next winner in the space, benefiting companies like Lordstown, which commanded a $5 billion market valuation just four months ago. That value has plunged to $1.78 billion as of Wednesday, as a newfound fandom among retail traders was eclipsed by its going-concern warning.

“This is a valuable lesson for investors,” Bespoke Investment Group said in a note. While betting on such early stage companies can hold the potential for high payoffs, “investors need to be aware that their positions could be effectively vaporware.”

The recent months have been troubling for high-flying EV startups, many of which went public by merging with so-called blank-check companies. Lordstown, which has been preparing to bring its debut truck to market, said in March there was a U.S. Securities and Exchange Commission probe into its operations. Others like Nikola Corp. and Velodyne Lidar Inc. saw their founders exiting the businesses.

Lordstown shares fell as much as 15% Wednesday to $9.52, below the debut level of the blank-check company it merged with in April 2019. Though the shares traded even lower in April and May, they got a new lease on life in the past couple weeks as meme stock-focused retail traders bid them up.

“If the company is unable to raise additional capital, based on our current estimates, we believe the net cash exiting 2021 would be about $60 million,” Goldman Sachs analyst Mark Delaney wrote in a note. The going concern warning from auditors also has the potential to make it more difficult for Lordstown to get payment terms with suppliers, he said.

More stories like this are available on bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2021 Bloomberg L.P.

(305) 707 0888