Courtesy Lordstown
Electric-vehicle maker
issued a “going concern” warning it its quarterly financial filings. That has the stock tanking in late trading Tuesday.
Shares dropped more than 30 from daily highs in late trading. Shares closed down more than 16% on the day. The
and
for comparison, finished the day roughly flat.
Lordstown (ticker: RIDE) management said it will need more cash to reach commercialization of its EV truck dubbed Endurance. They simply need more money to get to a point where they can make money.
“These conditions raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of these unaudited condensed consolidated financial statements,” reads the quarter report filed today.
A “going concern” warning is significant. For investors, it means the stock can go down significantly. Without an infusion of much-needed cash, existing stockholders could be wiped out.
The quarterly filing was late. Shares actually rose 7% during the regular session Monday, the first trading day after Lordstown disclosed that the late filing generated a notice from Nasdaq about a potential delisting. Companies have to maintain regular financial filings to be listed on major exchanges.
Lordstown shares have been caught up with other meme stocks, which are shares of heavily shorted companies that show up on social media sites encouraging retail traders to buy. About 31% of Lordstown stock available for trading is borrowed and sold short by bearish investors betting on price declines. That’s roughly five times the average short interest in other small-capitalization stocks. Meme traders target stocks with high short interest because a rapidly rising price can force short sellers to cover, driving shares even higher.
It’s been a difficult stretch for Lordstown investors. Coming into Tuesday trading, shares were down about 33% year to date.
Write to Al Root at allen.root@dowjones.com
