Steve Burns, the former founder, chairman, and CEO of Lordstown Motors, has reached a settlement with the U.S. Securities and Exchange Commission (SEC) regarding allegations of misleading investors about the demand for the company’s all-electric Endurance pickup truck. As part of the agreement filed with the U.S. District Court for the District of Columbia, Burns will pay a civil fine of $175,000 and is barred from serving as an officer or director of a public company for two years.
Former Lordstown Motors boss settles SEC lawsuit
The SEC’s investigation into Lordstown Motors began in February 2024 when the company was charged with misrepresenting the sales prospects of its Endurance electric pickup truck. In response, Lordstown Motors agreed to pay $25.5 million to settle the charges. This settlement marked a significant development in the aftermath of Lordstown Motors’ turbulent journey in the electric vehicle (EV) industry.
The company was founded in April 2019 as a spinoff of Burns’ previous venture, Workhorse Group. The company went public in the following year through a merger with a special purpose acquisition company, DiamondPeak Holdings Corp., which valued Lordstown Motors at $1.6 billion. This move attracted substantial investment, totaling $780 million from investors, as Lordstown Motors aimed to establish itself as a prominent player in the EV market.
Like many other EV startups that went public via mergers with blank-check companies in 2020, Lordstown Motors initially experienced a surge in share prices. However, this optimism was short-lived as the company faced challenges in scaling production and fulfilling sales expectations for its electric vehicles. Despite securing investments and partnerships, including support from General Motors (GM) and acquiring a large assembly plant in Lordstown, Ohio, from GM, Lordstown Motors encountered setbacks in meeting its targets.
Challenges and controversies in the EV industry
One pivotal moment for Lordstown Motors was in June 2020 when it unveiled its Endurance electric pickup truck amidst considerable fanfare, including a ceremony attended by former Vice President Mike Pence. At the event, Burns announced an impressive number of pre-orders, claiming 20,000 orders for the truck. However, subsequent investigations revealed discrepancies in these claims, with short seller research firm Hindenburg Research disputing the actual demand for the vehicle.
By June 2021, Burns and other executives resigned from Lordstown Motors amid mounting scrutiny and regulatory investigations. The SEC’s investigation found that Lordstown Motors and Burns had made misleading statements regarding the demand for the Endurance truck, particularly overstating pre-orders from commercial fleet customers. This misrepresentation painted an inaccurate picture of the actual demand and contributed to investor confusion.
Following these revelations, Lordstown Motors faced ongoing challenges and eventually filed for Chapter 11 bankruptcy protection. Despite the bankruptcy, the company emerged with a new name, Nu Ride Inc., and a renewed focus on pursuing legal action against Foxconn, alleging harm to its business by the tech giant. The settlement with the SEC serves as a reminder of the regulatory scrutiny and consequences faced by companies and executives in the dynamic and competitive EV industry.
