Lordstown Motors Shares Plunge as Investors See Problems

Quickly after, G.M. discovered a purchaser who promised to return auto jobs to the area: Steve Burns, the chief govt of a small electric-van enterprise, Workhorse Group. That firm had a tough design for an electrical pickup truck and an electrical helicopter.

Mr. Burns determined to depart Workhorse to type a brand new firm to make the truck, and he agreed to purchase the Lordstown plant for his new enterprise for simply $20 million.

However the deal was introduced so swiftly — Mr. Trump had stated on Twitter of Ms. Barra, “I requested her to promote it or do one thing shortly” — that Mr. Burns didn’t actually have a identify for his new firm or the cash to purchase the manufacturing unit. He turned to a small Cleveland funding financial institution, Brown Gibbons Lang & Firm, and scored an funding from G.M., which offered a $40 million mortgage for the manufacturing unit buy and different bills.

In August, Lordstown Motors introduced that it was merging with a SPAC, DiamondPeak Holdings. That deal, accomplished in simply two months, helped the corporate keep away from the 5 to seven years it usually takes start-ups to ascertain a monitor file for an preliminary public providing. Tesla, for instance, went public about seven years after it was based.

Ben Axler, the founding father of Spruce Level Capital Administration, stated many firms have been being pressured by SPAC backers, identified as sponsors, to go public earlier than they have been prepared. Mr. Axler has wager in opposition to shares of some firms that merged with SPACs, although he hasn’t wager in opposition to Lordstown.

“We’re seeing proof,” he stated, “that SPACs are overpaying for lower-quality companies.”

Lordstown’s lack of seasoning ought to have been obvious.

In a presentation to buyers, Lordstown indicated that it was counting on companions and suppliers, together with Workhorse, for a lot of its expertise and main parts. However one partnership has already soured: Karma Automotive has sued Lordstown, accusing it of making an attempt to steal commerce secrets and techniques and lure away key staff.