The short-seller that uncovered fraud at Nikola is accusing another upstart EV maker of misleading investors

Unveiling of the Lordstown Endurance_June 25, 2020_2
Hindenburg alleges that Lordstown’s orders are “largely fictitious.”

  • Hindenburg Research, which published a report on fraud at Nikola, has taken aim at Lordstown Motors.
  • The short-seller accused the EV startup of misleading investors, sending shares plummeting 20%.
  • Lordstown did not immediately respond to Insider’s request for comment.
  • See more stories on Insider’s business page.

Hindenburg Research, the short-seller that accused Nikola of “intricate fraud” and unraveled its deal with General Motors, is taking aim at another electric-vehicle startup.

The firm said Friday it is taking a short position in Lordstown Motors, accusing the company of pumping up preorder numbers to generate investor interest in a lengthy report. Like many EV startups, Lordstown went public through a special-purpose acquisition company in October.

Shares of Lordstown were down nearly 17% as of Friday afternoon.

“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,” Hindenburg said in its report titled “The Lordstown Motors Mirage.”

Lordstown did not immediately return Insider’s request for comment.

Read more: Nikola founder Trevor Milton convinced the world he was the next Elon Musk. Insiders say a history of lies brought the billionaire down.

Lordstown was founded in 2018 and plans to produce a commercial pickup truck for fleet use, the Endurance, at a shuttered GM plant in Lordstown, Ohio. One of Hindenburg’s key accusations is that, although Lordstown has said it has 100,000 preorders, few of those customers actually plan on buying a 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 legitimacy,” the short-seller said.

Hindenburg detailed conversations with multiple Lordstown preorder holders who said they don’t intend to follow through. One business owner who signed up for a 1,000-truck order said they won’t actually order any vehicles and described the preorder as a marketing relationship, according to Hindenburg.

Lordstown CEO Steve Burns pushed back against the claims in a statement to Bloomberg, saying “we always stated that pre-orders were non-binding. That is what pre-orders are.”

The short-seller also alleges that Lordstown is much further away from production than it says. It cites a former employee who estimates that production will start in three to four years, rather than by September, as Lordstown says.

Former employees also told Hindenburg that Lordstown “has completed none of its needed testing or validation, including cold weather testing, durability testing, and Federal Motor Vehicle Safety Standards testing required by the NHTSA.”

In September 2020, Hindenburg published a report accusing Nikola and its founder, Trevor Milton, of fraud. In the aftermath of the accusations, Milton departed the company and a major deal with GM fell through.

Nikola denied most of the allegations but said in February that it had determined that Milton made several inaccurate statements following an internal investigation.

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Nikola slides 12% after JPMorgan downgrades to neutral given that the ‘good news is priced in the stock’

nikola tre prototype
Nikola said it completed the first of five Tre prototypes planned for this year.

  • Nikola fell 12% on Friday after JPMorgan downgraded the firm to neutral from overweight, according to a note. 
  • The call from JPMorgan was “a tactical move” as much of the good news is priced into the stock.
  • Nikola’s steep decline on Friday came amid a broader decline in electric vehicle stocks like Tesla.
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Shares of Nikola dropped as much as 12% on Friday after JPMorgan downgraded the fuel-cell truck developer to neutral from overweight, according to a research note.

JPMorgan’s drive to downgrade Nikola was “a tactical move” based more on the timing of future catalysts than the underlying fundamentals, the note said.

According to the bank, the “good news is now priced in the stock, so we step aside for now,” the note said. The bank maintained its price target of $30, representing potential upside of 87% from Thursday’s close. 

Much of that good news includes evidence that the company is more focused on its goals and is passed the drama caused by founder and former CEO and chairman Trevor Milton.

Milton voluntarily stepped down from the company as chairman in late September, after a short-seller report from Hindenburg Research alleged that Milton and Nikola deceived investors. Nikola dismissed many of the claims raised in the report.

Nikola “has left much of the drama of 2020 behind,” JPMorgan said. 

But JPMorgan sees the Nikola’s story exciting investors once again in mid or late 2021 if customer orders are announced, “and as the first FCEL prototype comes to life,” the note said.

The decline in Nikola on Friday came amid a broader market sell-off in high-growth tech stocks that have been shunned by investors amid rising interest rates. Shares of Tesla were down as much as 13% on Friday.

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