On Sept. 28, 2020, then-President Donald Trump greeted a group of reporters gathered on the South Lawn of the White House.
"Well, ladies and gentlemen, this is incredible," he said.
Trump was referring to the Endurance electric pickup truck from Lordstown Motors (RIDE) that was parked right behind him.
Lordstown, which was founded in 2018 by Steve Burns, former CEO of Workhorse Group, had quite a story to tell.
The company took over a former General Motors (GM) plant in Lordstown, Ohio, and promised to revive the auto industry in the region by creating the jobs that were lost after GM closed the facility where the Chevy Cruze had been made.
“The area was devastated when General Motors moved out,” Trump said. “Beyond the plant, it’s incredible what’s happened in the area. It’s booming now. It’s absolutely booming. …It’s an incredible piece of science, technology.”
Lordstown went public in 2020 in a $675 million merger with SPAC DiamondPeak Holdings Corp,
But then the would-be Tesla (TSLA) rival ran into some serious roadblocks.
Lordstown Motors
Bankruptcy filing
In a 2021 report entitled the “The Lordstown Motors Mirage,” Hindenburg Research said that the company “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.”
"We think Lordstown has grossly misled the public about its order book and the progress of its proposed truck," the report said.
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Among other items, the report said that an Endurance prototype had burst into flames 10 minutes into its first road test.
Burns resigned after an investigation into the charges.
Last June, Lordstown Motors filed for Chapter 11 protection in U.S. Bankruptcy Court for the District Delaware.
The filing was a bid to restructure and sell the company's assets after failing to secure an investment from Taiwan-based smartphone assembler Foxconn, one of Apple's (AAPL) main suppliers.
The debtor also filed a lawsuit against Foxconn for alleged fraud.
The company had suspended production of its signature Endurance truck amid a host of supply chain disruptions.
And now a judge has confirmed Lordstown Motors’ third amended Chapter 11 plan of reorganization, finding the company is eligible for discharge of its liabilities, according to The Business Journal.
Lordstown Motors and Foxconn reached an agreement where Foxconn would retain its preferred equity rights yet also provide a $5 million “backstop” to help pay $10 million to Ohio securities class action plaintiffs.
Foxconn has filed a motion to dismiss Lordstown Motors’ fraud claim.
Lordstown Motors anticipates emerging from Chapter 11 with $78.4 million before making distributions to creditors, who will be paid in full, and shareholders, or reserving for future legal claims.
Judge: 'debtor has climbed the mountain'
The U.S. Trustee objected to the fact that Lordstown Motors will continue to do business post-bankruptcy, but not by making electric pickup trucks.
“The debtor has climbed the mountain and shown it is likely to achieve what it puts its mind to," Judge Mary F. Walrath said. "I clearly find this plan is feasible and meets all the qualities for a discharge.”
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The ruling comes a short time after Lordstown Motors agreed to pay out $25 million to shareholders to settle charges filed by the Securities and Exchange Commission that the company had mislead investors about the Endurance's sales prospects.
The SEC said on Feb. 29 that the company exaggerated the demand for the Endurance, claiming that the company had received more than 100,000 nonbinding “pre-orders” for the vehicle from commercial fleet customers.
In reality, the SEC said, most of the pre-orders came from companies that did not operate fleets or intend to buy the truck for their own use.
“We allege that, in a highly competitive race to deliver the first mass-produced electric pickup truck to the U.S. market, Lordstown oversold true demand for the Endurance,” Mark Cave, associate director of the Division of Enforcement, said in a statement.
In addition, Lordstown misrepresented the company’s timeline for delivering the Endurance by failing to account for production delays partially due to Lordstown’s inability to access many critical parts, the SEC said.
The SEC charged that Lordstown had made false statements both before and after its Nasdaq listing.
"During and after the merger, which raised approximately $675 million from investors, Lordstown and Burns made materially false and misleading statements about Lordstown’s business in SEC filings and other public statements," the SEC said in a settled order.
Lordstown’s former auditor, Clark Schaefer Hackett and Co., agreed to a censure, a cease-and-desist order, the payment of more than $80,000 in civil penalties.
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