- Usually, if you sell a stock for $24 before it drops to $10, that’s a good thing (well, not for the buyer). But if you’re an executive at an electric-vehicle startup with perhaps some inside information and you do that, well, that’s potentially suspicious.
- That’s what happened at Lordstown Motors, the company preparing to build the Endurance electric pickup (pictured). It turns out, five executives sold off shares in early February, just as news of a mid-January prototype fire was breaking.
- Lordstown president Rich Schmidt sold 39 percent of his shares for $4.6 million, and the startup’s propulsion head, Chuan “John” Vo, sold almost all of his shares for $2.5 million.
Members of the leadership team at Lordstown Motors appear to have sold large amounts of company stock just before reports of various troubles at the company became public. Five top Lordstown executives—including president Rich Schmidt, now former chief financial officer Julio Rodriguez, and propulsion head Chuan “John” Vo—sold some of their shares worth a total of more than $8 million in early February when the stock was worth around $24 a share. Today, it’s worth around $10.
The reason this is all news, other than the fact that Lordstown is dealing with the departure of its founder and CEO, among other issues, is that something else was happening in early February: news was getting out that one of the prototype for the company’s all-electric pickup truck, the Endurance, caught fire in early January.
Lordstown began trading shares after a splashy NASDAQ debut in October 2020 as part of a reverse merger with DiamondPeak Holdings Corp., a special purpose acquisition company, or SPAC. Lordstown reaffirmed to the media last week that it will indeed start building the Endurance in September and deliver the first units to customers in early 2022.
On June 14, Lordstown issued a press release responding to a report issued by Hindenburg Research that called some of the automaker’s claims into question. While most of that release dealt with the company’s production issues, the board special committee that issued the release also dealt with the share sales and said they were sold for reasons that didn’t have to do with how well Lordstown was doing. It said, in part: “As described in various Form 4 filings in the months following the DiamondPeak transaction, certain Lordstown Motors directors and executives have sold or transferred shares in the Company. Each of those transactions were made for reasons unrelated to the performance of the company or viability of the Endurance, and each such director and executive retained substantial Lordstown Motors equity holdings in the form of shares and options following the sales and transfers described in the Company’s public filings.”
That claim does not appear to be completely true. Both CNN and the Wall Street Journal report that Vo sold 99.3 percent of his vested shares for a cool $2.5 million on February 2. He held on to just 717 shares. Schmidt sold 39 percent of his vested equity for $4.6 million. The other three executives sold shares worth between $250,000 and $400,000. Lordstown did not respond to Car and Driver’s request for clarification on this point but there does not seem to have been any laws broken, and the Journal says most other companies—98 percent—have blackout days where company insiders are not allowed to sell shares just before quarterly disclosures.
The Securities and Exchange Commission has issued two subpoenas to Lordstown about the SPAC merger and surrounding public statements. Lordstown said it is cooperating with the investigation.
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