Lordstown Motors CEO, CFO resign, sending shockwaves to shareholders

The top two executives of electric pickup truck maker Lordstown Motors have resigned, possibly further clouding the company's future even as some industry analysts approve of the management changes.

Lordstown Motors on Monday announced that company founder Steve Burns resigned as chief executive officer and from the board of directors. Also resigning was Julio Rodriguez, chief financial officer. The resignations took place Sunday, with letters from the Northeast Ohio company saying the employment of both men had been terminated.

The announcement sent Lordstown Motors stock down sharply Monday. Shares closed down $2.15, or 18.8%, to $9.26. Shares were as low as $8.91 in earlier trading. Shares have ranged from a low of $6.69 to a high of $31.80 over the past 52 weeks.

The company did not cite specific reasons for the two resignations in its filing Monday with the Securities and Exchange Commission.

But in a separate news release, Lordstown Motors said the company has made inaccurate statements tied to non-binding pre-orders of its Endurance full-size electric pickup truck. That announcement comes after the company last week said it needs significant infusions of money to remain in operation.

The second release was in response to a highly critical March analysis of the company by Hindenburg Research, a firm that specializes in short selling, that Lordstown Motors referred to as the Hindenburg Report.

Lordstown Motors said its investigation of the Hindenburg Report concluded that the report "is, in significant respects, false and misleading. In particular, its challenges to the viability of Lordstown Motors’ technology and timeline to start of production are not accurate. The investigation did, however, identify issues regarding the accuracy of certain statements regarding the company’s pre-orders."

Some Lordstown disclosures found 'inaccurate'

Lordstown Motors made periodic disclosures regarding pre-orders that were, "in certain respects, inaccurate," the company said.

"Lordstown Motors has stated on several occasions that its pre-orders were from, or 'primarily' from commercial fleets," the company said. "In fact, many pre-orders were obtained from ... fleet management companies or other end users that indicated interest in purchasing Endurance trucks, similar to commercial fleets, and so-called 'influencers' or other potential strategic partners that committed to attempt to secure pre-orders from other entities, but did not intend to purchase Endurance trucks directly."

"One entity that provided a large number of pre-orders does not appear to have the resources to complete large purchases of trucks," Lordstown Motors said. "Other entities provided commitments that appear too vague or infirm to be appropriately included in the total number of pre-orders disclosed."

The SEC earlier this year subpoened Lordstown Motors for documents and information related to the merger between DiamondPeak and Legacy Lordstown that created the publicly traded company, and pre-orders of vehicles.  The company said it is cooperating with the SEC.

Lordstown Week event still on the calendar starting June 21

The company said it still plans to hold "Lordstown Week" starting June 21 to show off the factory and its Endurance pickup truck prototypes for shareholders, partners, suppliers and other invited guests. The event will include meetings and presentations with the company's now revamped executive team.

The management change "could be an actual or perceived prerequisite of [Lordstown Motors] securing much needed additional capital," John Murphy, industry analyst with Bank of America, said in a note to clients.

The interim executive team "appears to be an upgrade," Murphy wrote. The leadership changes follow a series of challenges and negative headlines since it first became a publicly traded company in October 2020, he said. The resignations of Burns and Rodriguez "seem somewhat due," he said. 

Lordstown Motors investigation of the Hindenburg Report appears to have "somewhat exonerating conclusions" but Murphy thinks the investment community may remain skeptical of those conclusions.

R.F. Lafferty Equity Research on Monday downgraded Lordstown Motors to "Sell."

In a note to clients titled "Crashes and Burns" (a punny reference to now ex-CEO Steve Burns), Lafferty senior analyst Jaime Perez noted ongoing concerns about the company.

"With the level of uncertainty increasing in the future of Lordstown, we find it prudent to lower our rating to Sell," Perez wrote. He lowered his firm's stock price target by $6 to $3 a share.

“Lordstown Motors has achieved significant milestones on the path to developing the first and best full-size all-electric pickup truck, the Lordstown Endurance. We thank Steve Burns for his passion and commitment to the company," David Hamamoto, board member, said in a statement. "As we transition to the commercial stage of our business – with planned commencement of limited production in late-September – we have to put in place a seasoned management team with deep experience leading and operating publicly-listed OEM companies.”

Lordstown Motors has been touted the possible future for the Mahoning Valley after General Motors stopped vehicle production at the mammoth, 6.2 million square foot Lordstown Assembly Plant in Trumbull County. Lordstown Motors says it wants to turn the facility "into the epicenter of electric-vehicle manufacturing." The former GM plant, which dates back to the 1960s, has been a critical part of the Mahoning Valley economy, employing thousands of people at its peak.

Monday's filing said in part, "Effective immediately, pursuant to mutual agreements with the company, Steve Burns resigned as the Chief Executive Officer of the company and from the company’s board of directors ... and Julio Rodriguez resigned as Chief Financial Officer of the company."

The company said it has hired a search agency to help it find a new chief executive and chief financial officer.

The two former Lordstown Motors executives will be getting so-called golden parachutes as part of their separation agreements, according to the SEC filing. Burns will get $750,000 over 18 months, while Rodriguez will get $200,000 plus vested stock options.

More:Lordstown Motors' financial shortfalls don't mean death for the company, analysts note

Last week, Lordstown Motors revealed in SEC filings that it doubted it could stay viable without a significant infusion of capital. The company's business plan calls for selling the Endurance to fleet operators, with planned development of other vehicles using the Endurance platform in upcoming years.

A company spokesman said Lordstown Motors had sufficient funding to accomplish much of its goals this year and was actively talking to sources of capital, including loans. The company said it had nearly $590 million in available cash but needed significantly more than that to fulfill its plans.

As a result of the resignations, Lordstown Motors at least temporarily will have three women as its top executives.

The board said it appointed Angela Strand, the current lead independent director, as executive chair, Becky Roof as interim chief financial officer and Jane Ritson-Parsons, 58, the current interim chief brand officer, as chief operating officer, each effective as of June 13.

Strand, 52, will oversee the organization’s transition until Lordstown Motors hires a permanent CEO, the company said.

'Committed to delivering' says Lordstown's new executive chair

“We remain committed to delivering on our production and commercialization objectives, holding ourselves to the highest standards of operation and performance and creating value for shareholders," Strand said in a news release. "Along with the management team, I will continue to work closely with them and the board to execute on Lordstown’s vision for the future of electrified transportation. I am excited to lead the passionate and dedicated team of Lordstown employees and to work with our valued customers, suppliers, investors and partners and to hosting Lordstown Week, which commences on June 21st.”

Strand, who has a background in electric vehicle development, including holding patents, previously was a vice president at Cincinnati-based Workhorse Group, a technology company and electric vehicle maker run at one point by now-ousted Lordstown CEO Burns. (Workhorse is a shareholder in Lordstown; Burns left Workhorse to found Lordstown.) Strand has worked for other EV companies as well and became a Lordstown director in 2020.

Roof, 65, managing director at consulting firm AlixPartners, will serve as the interim CFO until a permanent hire is made. The company said it will pay Roof at a rate of $1,200 an hour through AP Services LLC, part of AlixPartners.

"We have complete confidence in Angela and Becky, and our expanded leadership team, to effectively guide the company during this interim period," Hamamoto said.

Jim Mackinnon covers business. He can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com. Follow him @JimMackinnonABJ on Twitter or www.facebook.com/JimMackinnonABJ.