Lordstown Motors Stock Slumps As Investors See Trouble

Soon after, GM found a buyer who promised to return auto jobs to the region: Steve Burns, CEO of a small electric van company, Workhorse Group. That company had a rough design for an electric pickup and an electric helicopter.

Mr. Burns decided to leave Workhorse to form a new company to manufacture the truck and agreed to purchase the Lordstown plant for his new company for only $ 20 million.

But the deal was announced so hastily (Trump had said on Twitter about Ms. Barra: “I asked him to sell it or do something quick”), Burns didn’t even have a name for his new company or the money to buy the company. factory. He turned to a small Cleveland investment bank, Brown Gibbons Lang & Company, and obtained an investment from GM, which provided a $ 40 million loan for the purchase of the factory and other expenses.

In August, Lordstown Motors announced that it would merge with a SPAC, DiamondPeak Holdings. That deal, completed in just two months, helped the company avoid the five to seven years it normally takes for startups to establish a track record for an initial public offering. Tesla, for example, went public about seven years after its founding.

Ben Axler, founder of Spruce Point Capital Management, said that SPAC’s backers, known as backers, were pressuring many companies to go public before they were ready. Axler has bet against the shares of some companies that merged with the SPAC, although he has not bet against Lordstown.

“We’re seeing evidence,” he said, “that SPACs are overpaying for lower-quality business.”

Lordstown’s lack of seasoning should have been obvious.

In a presentation to investors, Lordstown indicated that it relies on partners and suppliers, including Workhorse, for much of its technology and major components. But one association has already soured: Karma Automotive has sued Lordstown, accusing it of attempting to steal trade secrets and attract key employees.

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