SPAC: US DOJ Probing EV Startup Lordstown Motors

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In the latest episode of the saga with electric vehicle startup Lordstown Motors, it’s now facing an investigation from the US Justice Department for possible fraud. The pilot of this saga were fraud accusations from short-seller Hindenburg this March and has made for an interesting series since that time.

  • The Justice Department’s investigation into Lordstown Motors was first reported by The Wall Street Journal. It’s being handled by the U.S. attorney’s office in Manhattan and is in its early stages, the report said.
  • With big ambitions, Lordstown Motors went public last year through a merger with a special-purpose acquisition company (SPAC) that added $675mn to its cash coffers to fund commercial production of its planned electric truck. But fast forward a few months after and Lordstown warned that it didn’t have sufficient cash to fund production, weighing down investor hopes.
  • The warning from Lordstown opened up a storm of backlash that despite raising hundreds of millions and promising it was enough to fund production, the company then backtracked to say it didn’t have enough capital to do that. The situation gave credence to accusations from a short-seller that Lordstown faked crucial figures to woo investors.
  • Shortly after the warning, news emerged that Lordstown executives had cashed out some few million dollars ahead of its first earnings report, a bad signal to investors.
  • With federal prosecutors now on its neck, Lordstown may have more troubles ahead. In a statement, the company said it was “committed to cooperating with any regulatory or governmental investigations and inquiries.”
  • The probe from federal prosecutors adds to a previous probe from the US Securities and Exchange Commission (SEC) that was disclosed by the company in March. That probe originated from allegations against the company by short-seller Hindenburg.

  • Lordstown stock fell as much as 17% during trading on Friday, the day the DOJ’s probe was disclosed. It was briefly halted for volatility during the day and closed trading down 11.7%, with a market cap of $1.6bn.

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