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ADMIN 2021. 09. 28.  
   제목: Bottom Drops Out of the Red-Hot Market for Electric Vehicle Start-Ups

Bottom Drops Out of the Red-Hot Market for Electric Vehicle Start-Ups

Lordstown Motors said it would start producing and selling electric pickup trucks this year, but there is little evidence it is ready to do so. Its stock has tumbled from a high of about $30 last year to around $8.

By Neal E. Boudette and Matthew Goldstein
May 12, 2021

Lordstown Motors is one of a dozen electric vehicle start-ups that have wowed investors with big plans to revolutionize the auto industry. It won acclaim for taking over a plant whose shutdown by General Motors drew the wrath of President Donald J. Trump.

But Lordstown seems far from achieving its goal of churning out electric pickup trucks starting in September and becoming a challenger to G.M. and Ford Motor.

In February, a prototype it was testing in Michigan caught fire and burned so long and so hot that there was nothing left of the rubber tires. Then, in April, another prototype dropped out of a 280-mile off-road race in Baja California after just 40 miles, performing worse than a 1980s vintage Toyota converted to run on a Nissan Leaf motor and battery. The company hasn뭪 begun hiring the union workers it promised would assemble its trucks even as it recently listed openings for an executive chef and a fitness coach.

Lordstown is also being investigated by the Securities and Exchange Commission, and its stock has tumbled from a high of about $30 last year to less than $8.

The swift rise and faltering prospects of Lordstown are emblematic of the recent mania for E.V. businesses that are far from making a product, let alone selling it. That frenzy has been driven by investors looking for the next Tesla, a pioneer in the industry that has a strong sales lead over other electric-car makers. And it has been enabled by Wall Street firms eager to reap profits by absorbing fledging businesses into shell companies equipped with a pile of cash and a stock exchange listing.

Even as the stock market climbs to new highs, the bottom seems to be falling out of many E.V. companies that merged with the shell outfits known as special purpose acquisition companies, or SPACs, which Wall Street has used to pour money into fledgling ventures seeking funding. Shares of Nikola, which is developing heavy trucks, have fallen from around $65 to about $12, for example. The S.E.C. is looking into allegations by an investment firm that Nikola made false statements about its technology. The company has denied wrongdoing, but it acknowledged in February that some of its past statements were 밿naccurate in whole or part.

Special purpose acquisition companies are also known as blank-check companies, because they allow start-ups they acquire like Lordstown and Nikola to raise capital, often without revealing detailed plans for its use. The rush to start such operations has abated in recent months in the face of rising scrutiny from securities regulators.

밃 lot of these companies are going public too early, said Erik Gordon, a business professor at the University of Michigan who closely follows the auto industry. 밫hey have the risk profile for venture capital and private investment. They really don뭪 make sense as public companies yet.

Lordstown attracted attention because of its unusual beginning two years ago. The Lordstown, Ohio, plant it owns was built by General Motors in the 1960s, once employing several thousand union workers on three shifts a day. In 2018, G.M. announced that it was closing the factory, citing the decline in sales of the sedan built there, the Chevrolet Cruze.

Mr. Trump, who had declared at a rally the previous year in nearby Youngstown that manufacturing jobs were 밶ll coming back, was livid. He attacked G.M. and its chief executive, Mary T. Barra. Ohio politicians, both Republicans and Democrats, also criticized the move.

Soon after, G.M. found a buyer who promised to return auto jobs to the region: Steve Burns, the chief executive of a small electric-van business, Workhorse Group. That company had a rough design for an electric pickup truck and an electric helicopter.

Mr. Burns decided to leave Workhorse to form a new company to make the truck, and he agreed to buy the Lordstown plant for his new venture for just $20 million.

But the deal was announced so hastily Mr. Trump had said on Twitter of Ms. Barra, 밒 asked her to sell it or do something quickly that Mr. Burns didn뭪 even have a name for his new company or the money to buy the factory. He turned to a small Cleveland investment bank, Brown Gibbons Lang & Company, and scored an investment from G.M., which provided a $40 million loan for the factory purchase and other expenses.

In August, Lordstown Motors announced that it was merging with a special purpose acquisition company, DiamondPeak Holdings. That deal, completed in just two months, helped the company avoid the five to seven years it typically takes start-ups to establish a track record for an initial public offering. Tesla, for example, went public about seven years after it was founded.

Ben Axler, the founder of Spruce Point Capital Management, said many companies were being pressured by SPAC backers, known as sponsors, to go public before they were ready. Mr. Axler has bet against shares of some companies that merged with SPACs, though he hasn뭪 bet against Lordstown.

밯e are seeing evidence, he said, 뱓hat SPACs are overpaying for lower-quality businesses.

Lordstown뭩 lack of seasoning should have been apparent.

In a presentation to investors, Lordstown indicated that it was relying on partners and suppliers, including Workhorse, for much of its technology and major components. But one partnership has already soured: Karma Automotive has sued Lordstown, accusing it of trying to steal trade secrets and lure away key employees.

Perhaps Lordstown뭩 biggest selling point to investors was that fleet operators had placed thousands of 뱎re-orders for its truck, the Endurance. The S.E.C. is investigating those claims, which also figured prominently in a report by Hindenburg Research, a small investment firm that has bet against Lordstown뭩 stock. Hindenburg said that many of those were not binding orders and that some were placed by tiny businesses that operated no fleets.

In an appearance on CNBC in March, Mr. Burns acknowledged that pre-orders were not binding. 밒 don뭪 think anyone thought that we had actual orders, right? he said.

Excerpts articles from The New York Times

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