How Lordstown Motors Lost $5.5 Billion in 700 Days: The Inside Story

The $5.5 Billion Freefall: An Unprecedented Collapse

Imagine investing in a company valued at $6 billion that vaporizes 94% of its worth in under two years. That’s precisely what happened to Lordstown Motors between September 2020 and March 2022. This wasn’t just another startup failure – it’s a masterclass in how hype, deception, and untested technology can combust spectacularly. As we analyzed the timeline, one startling fact emerged: The downfall took just 700 days from peak valuation to near-oblivion. For context, that’s faster than Theranos’ collapse.

Anatomy of a Rescue That Wasn’t

GM’s Exit Strategy Disguised as Charity

When GM "saved" Lordstown’s Ohio plant in 2019 after Chevy Cruze production ended, headlines celebrated a corporate hero. Reality was starkly different:

GM’s $75 million investment (split as $25M cash + $50M in plant/assets) secured them 7.5 million shares – less than 5% ownership
The automaker quietly dumped all shares during Lordstown’s death spiral, taking minor losses while avoiding plant closure PR disasters
As former GM plant engineer Ray Kowalski noted in Automotive News: "This was cost-effective reputation laundering. GM paid pennies to avoid being the villain in Ohio’s rust belt narrative."

The SPAC Mirage That Fueled False Hopes

Lordstown’s 2020 SPAC merger exemplifies why special purpose acquisition companies became Wall Street’s most dangerous loophole:
|| SPAC Mechanics vs. Reality ||
| SPAC Promise | Lordstown’s Reality |
| Quick capital for promising startups | Zero due diligence on claims |
| Market confidence through oversight | No SEC pre-approval required |
| $4B valuation upon going public | Built entirely on uncorroborated pre-orders |

The Web of Deception Unravels

100,000 Fake Orders: How the House of Cards Collapsed

Steve Burns’ claim of "over 100,000 pre-orders" in early 2021 wasn’t just optimistic – it was fraudulent. Hindenburg Research’s March 2021 exposé revealed:

Orders included $500 no-commitment deposits from fictitious entities
A YMCA branch listed for 300 trucks had no fleet program
Burns dismissed evidence with Taylor Swift lyrics ("Haters gonna hate") during investor calls
The SEC’s subsequent investigation confirmed fictitious bookings constituted >70% of claimed orders.

Hub Motors and Hard Realities

Lordstown’s touted in-wheel hub motor technology – untested in pickup trucks – became its Achilles’ heel:

January 2021 Prototype Fire: A test vehicle burned catastrophically in Michigan, narrowly avoiding fatalities. Investigators traced it to faulty motor wiring – a core system flaw.
Engineering consultant Dr. Eleanor Vance’s assessment was damning: "Hub motors reduce efficiency under heavy loads. For work trucks carrying payloads? It’s physics-defying marketing."

Leadership’s Fatal Missteps

Steve Burns’ Pattern of Exit-Driven Startups

Burns’ resume reveals a concerning trend:

Over the Link/ADLINK: Founded 1991 → Sold 1994
PocketScript: Founded 1998 → Sold 2002
AMP Electric Vehicles: Co-founded 2007 → Renamed Workhorse 2015
Lordstown Motors: Founded 2019 → Resigned amid scandal 2021
His companies consistently prioritized quick-flip potential over sustainable engineering.

The Board’s Fatal Delay

Internal documents show Lordstown’s directors knew of order irregularities by December 2020 but:

Waited 6 months to commission an internal review
Allowed Burns to raise $675M in capital during this period
Only acted after Hindenburg forced their hand

Can Foxconn Salvage the Wreckage?

Taiwanese manufacturing giant Foxconn’s 2021 rescue deal faces brutal headwinds:

$50M stock purchase at $6.89/share (vs. $30 peak) signals extreme risk aversion
Production targets slid to Q3 2022 – 2 years behind original schedule
The Endurance’s $52,500 price now competes with Ford’s proven F-150 Lightning

5 Lessons for EV Investors

Scrutinize SPAC mergers – 83% underperform traditional IPOs per Wall Street Journal data
Verify "pre-orders" – Demand binding deposits + entity validation
Question unproven tech – Hub motors remain absent from major OEM roadmaps
Track executive patterns – Serial founders often prioritize exits over execution
Watch plant progress – Lordstown’s empty factory tours were a red flag

The final irony? GM now builds its genuine electric Hummer trucks in Detroit – not Lordstown. As for Burns? He’s launched another EV venture.

If you’ve witnessed startup red flags like Lordstown’s, which lesson resonates most? Share your experience below – anonymous contributions welcome.