Lordstown Motors Highlights New Risk Factors Ahead of Endurance Truck Production

Lordstown Motors (RIDE) is an American electric vehicle company. It is focused on producing pickup trucks for the commercial fleet market and is preparing to bring its flagship Endurance truck to market. (See Insiders’ Hot Stocks on TipRanks)

Let’s take a look at the company’s latest financial performance, corporate updates, and newly added risk factors.

Q2 Financial Results

Lordstown Motors did not report any revenue for Q2 2021. It posted a loss per share of $0.61. That compared to a loss per share of $0.11 in the same quarter last year and missed the consensus estimate of a loss per share of $0.46. Capital expenditures hit $121 million, and the company ended the quarter with $366 million in cash. (See Lordstown Motors stock charts on TipRanks).

Corporate Updates

Lordstown Motors has agreed to sell its Ohio factory to Foxconn for $230 million. It then plans to enter into a contract manufacturing agreement with Foxconn to produce its Endurance trucks at the facility.

In addition, Foxconn has agreed to purchase $50 million of Lordstown Motors’ stock. On September 30, Lordstown estimated its cash balance to be in the range of $210 million to $240 million before factoring in proceeds from the stock sale to Foxconn. It anticipates capital expenditures in the range of $375 million to $400 million for full-year 2021.

The company could access up to $400 million in cash through an equity purchase agreement with YA to finance its operations. It continues to seek other capital infusion opportunities, including through equity and debt deals.

Lordstown Motors aims to begin limited production of the Endurance truck for testing and regulatory approvals towards the end of 2021 and into the first part of 2022. The company plans to provide an update on the Endurance commercial production plan during its Q3 earnings call.

Lordstown Motors has appointed former JPMorgan (JPM) investment banker Adam B. Kroll as Chief Financial Officer effective October 25. This followed the appointment in August of former Icahn Enterprises (IEP) CEO Daniel A. Ninivaggi as the new Lordstown Motors CEO.

Risk Factors

A total of 60 risk factors have been identified for Lordstown Motors, according to the new TipRanks Risk Factors tool. Since June 2021, the company has updated its risk profile with three new risk factors.

Lordstown Motors tells investors that it cannot predict at this time how many shares it will need to sell to YA under their equity purchase agreement to allow it access to up to $400 million in capital. But it cautions that the arrangement with YA could cause significant dilution to existing shareholders.

The company says that its management will have the discretion to use the money raised from YA as it sees fit. But it cautions that how management decides to spend the money may not improve the company’s financial condition, nor advance its business objectives.

Lordstown Motors says it may need more money than it expects to raise from YA to continue its operations. Therefore, it warns that it may be unable to fully implement its business plan without access to additional funding.

The majority of Lordstown Motors’ risk factors fall under the Finance and Corporate category, with 43% of the total risks. That is above the sector average of 39%. Lordstown Motors’ stock price has declined about 75% year-to-date.

Analysts’ Take

RBC Capital analyst Joseph Spak recently reiterated a Sell rating on Lordstown Motors stock but raised his price target to $5 from $1. Spak’s new price target suggests 1.38% downside potential.

Consensus among analysts is a Moderate Sell based on 1 Buy, 3 Holds, and 3 Sells. The average Lordstown Motors price target of $6.67 implies 31.56% upside potential to current levels.