Lordstown Motors (RIDE)’s Chapter 11 bankruptcy filing highlights the ups and downs of electric vehicle startups whose shares have gone to the moon and back during the pandemic.
Lordstown has been a Wall Street favorite during the pandemic after the unveiling of the Endurance Truck at the White House Next to former President Donald Trump. The startup went public via a special purpose acquisition company (SPAC) in 2020, and its share price quickly skyrocketed to $435.
Shares of the Ohio-based electric truck developer fell 25% on Tuesday afternoon, hovering around $2 each — down 99% from their February 2021 peak.
Like some of the darlings of the electric car pandemic, Lordstown has suffered short seller pressures, investigations and tighter monetary policy as the era of easy money winds down. To make matters worse, cash-intensive emerging electric car companies have had to sell more shares on the public markets over the past year to raise cash, driving down their share prices even further.
“It’s not surprising that some churn is coming out of this area,” Matt Maley, chief market strategist at Miller Tabac, told Yahoo Finance. “There’s less money being wasted…and it’s going into AI right now.”
Last month, Lordstown announced a reverse share split in order to increase the minimum listing requirement for a Nasdaq share of $1.00.
Phoenix-based Nikola Stock (NKLA) met a similar fate, with shares falling below $1 in May.
The startup has been flying high in 2020 after going public via SPAC. A harsh short seller report knocked the stock down in November of that year. Ultimately, Trevor Melton, founder and chairman of Nikola, resigned, and the executive leadership wing underwent a cabinet reshuffle.
Despite the challenges, earlier this year the startup celebrated the completion of its 100th Class 8 Nikola Tree hydrogen fuel cell electric vehicles (FCEVs) Sold.
However, compared to electric car giant Tesla (TSLA), it has been more difficult to meet the start-up’s production targets amid fractured supply chains, high labor costs, and inflated prices for raw materials.
Tesla’s (TSLA) production rate for the fourth quarter was 4,779 units per day.
By comparison, California-based newcomer Lucid (LCID) was only producing vehicles at a rate of about 38 units a day, “which is nowhere close to achieving mass production,” Garrett Nelson, vice president and senior equity analyst at CFRA Research, told Yahoo. Finance in January.
The company expects to deliver between 10,000 and 14,000 vehicles in 2023, compared to Wall Street’s forecast of about 20,000 to 22,000.
Short sellers have accumulated names like Lucid, which reached as high as $55 in November 2021. Short interest on the stock is currently at 25% of the float.
Electric vehicle makers are devising strategies to weather the coming economic storm as the economy slows and demand concerns grow.
California-based Rivian (RIVN) is taking to the demo store spaces to sell more of its vehicles. Rivian has delivered nearly 30,000 vehicles since production began in September 2021 and has produced approximately 35,000 vehicles.
As Pras Subramanian, Yahoo Finance’s chief automotive correspondent, notes, “Rivian’s goal of getting 50,000 deliveries this year alone is a big one—especially for trucks that start at around $73,000.”
There is “a lot of uncertainty about who will survive,” CFRA Research senior equity analyst Garrett Nelson told Yahoo Finance on Tuesday.
Nelson added, “We believe that the companies in a better position are those that currently produce and sell cars … those that have a large liquidity position, and it is better to support large investors.”
Ennis is a Senior Business Correspondent at Yahoo Finance. Follow her on Twitter at @employee
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