Lordstown Motors (RIDE) revealed that several top executives sold shares in the electric-truck startup ahead of its first public quarterly report in March, regulatory filings showed. RIDE stock fell.
The news comes as the electric-truck startup, backed by General Motors (GM), kicks off a critical week after a string of damaging blows.
All told, five top executives sold more than $8 million in stock in early February, according to the Wall Street Journal, which first reported the news. On March 17, Lordstown reported a worse-than-feared loss for its fiscal first quarter.
Lordstown President Rich Schmidt, a former Tesla (TSLA) manufacturing executive, sold 39% of his vested equity over two days for $4.6 million, the report added. Another executive, Chuan “John” Vo, sold 99% of his vested equity, leaving him with 717 shares and more than $2.5 million in proceeds.
The sale transactions of the other three executives ranged between $250,000 and $400,000 in value. Schmidt used some of the proceeds to grow a turkey-hunting venture, a spokesman said.
Four of the five executives declined comment, as did the company itself on its financial oversight of executives. The fifth, former CFO Julio Rodriguez, could not be reached for comment.
On June 14, a board special committee concluded the sales of RIDE stock “were made for reasons unrelated to the performance of the company.” Still, securities experts say such trades raise questions about the company’s internal controls.
Most companies also have blackout periods prohibiting trades by top officers around quarterly earnings. The size of sales of Lordstown stock within months of the EV startup going public also are unusual, experts told the Journal.
Meanwhile, Morgan Stanley on Monday reported the results of a survey of institutional investors and industry experts last week. The poll found that a majority (54%) of respondents expect Lordstown to secure funding as it attempts to resolve issues, but to struggle operationally.
And respondents were evenly split on the issue of whether GM should be concerned or not on the Lordstown situation.
Analysts at the firm recently removed their rating and price target on RIDE stock, citing risks. In Monday’s note, they wrote that “we believe clients should follow suit.”
Shares fell 2.8% to 10.36 in Monday’s stock market, but is still holding above the 50-day line, according to MarketSmith chart analysis. RIDE stock is down roughly a third since a March 12 short seller report accusing it of fake preorders for its first fully electric truck, the Endurance.
Lordstown hosts journalists, investors and analysts at its Ohio factory June 21-25. The “Lordstown Week” event promises factory tours and test drives of the Endurance, which Lordstown claims will be the world’s first all-electric pickup truck to market.
The company’s also looking to reassure Wall Street of its ability to produce electric vehicles at scale, after negative headlines.
First, Lordstown warned it needed more money to survive. Then CEO Steve Burns and CFO Julio Rodriguez quit, after a board investigating the short-seller’s allegations found “inaccurate” disclosures. Then regulatory filings revealed Lordstown has no binding orders at all, contradicting earlier statements.
Initial production of the Endurance is set to begin in late September. Ford‘s (F) F-150 Lightning, which Lordstown pitches as a rival to its electric pickup, is due next year.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
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