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New Delhi: Lordstown Motors, an Ohio company under scrutiny of the number of orders it claims to have had for the electric trucks it wants to produce, has admitted to receiving two subpoenas from federal regulators and that prosecutors in New York have opened an investigation.
The Securities and Exchange Commission has requested in a pair of subpoena documents relating to the company’s merger with DiamondPeak, a special purpose acquisition company.
Special Purpose Acquisition Companies, or SPACs, have gained prominence this year as a quick way to get listed and list stocks on the stock exchange.
SPACs can reduce the time it takes for a company to trade its shares on the stock exchange by up to 75%, compared to the traditional process of an initial public offering. After-sales services can also facilitate the enrollment of potential buyers. Companies that take the PSPC route often feel more empowered to highlight the high growth projections they expect in the future, for example. In a traditional IPO, the company is limited to listing its past performance, which may not be a great selling point for young startups who typically fail to generate large profits or revenue.
This dynamic is unfolding as Lordstown’s operations come under increasing scrutiny, from which it was partially shielded when it was made public through a PSPC.
Last month, Lordstown admitted it did not have firm orders for its vehicles days after its chairman said the company had enough to keep production going until 2022.
The CEO and CFO of the company resigned the same week.
In its regulatory filing with the SEC, Lordstown said the United States Attorney’s Office for the Southern District of New York is “investigating these matters.”
He said he is cooperating with all inquiries and inquiries.
Shares of Lordstown Motors Corp., which have been hammered in recent weeks, fell 2% on Friday. Shares are down nearly 60% year-to-date.
It is now questionable whether Lordstown, which is named after a village just west of Youngstown, Ohio, has sufficient funds to continue its operations. Last month, Angela Strand, the company’s new president, said the developments would not disrupt the company’s day-to-day operations or its plans to start manufacturing its electric truck called Endurance.
In March, the company’s shares slumped after investment research firm Hindenburg Research said Lordstown misled consumers and investors about pre-orders worth $ 1.4 billion for its Endurance truck.
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