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Short sellers betting against Ohio-based electric vehicle manufacturer Lordstown Motors have made significant profits throughout the course of this year. Lordstown, which came to the limelight earlier this year after a report from Hindenburg Research alleged irregularities, aims to manufacture electric trucks and is known for its partnership with General Motors, which has included the company as its Tier 1 supply chain partner. Now, data from S3 Partners reveals that the short sellers had gained $236 million in their bets against the company as of the start of this month.
Lordstown Motors Loses More Than Half Of Share Price Value Resulting In Hefty Short Seller Gains
Lordstown Motors opened with a share price of $20.38, which was already below its all time high price of $29, which the shares had touched in September last year due to investor enthusiasm for its electric truck. However, the stock went on to lose roughly 30% of this later during the year, and all hopes for recovery were dashed this year, especially in the aftermath of Hindenburg Research's shocking report which saw management shakeups at the company.
The report had alleged that Lordstown's first test for its Endurance pickup truck resulted in the vehicle catching fire, an event that the company later confirmed. However, it refuted other claims by the short seller, yet the subsequent management shakeup saw its former chief executive and chief financial officers, Mr. Steve Burns and Mr. Julio Rodriguez, resign from their roles with the company agreeing not to proceed with legal charges against the pair.
All this drama has affected Lordstown's share price, which is now below the levels the stock opened at when the company went public through a merger with a special purpose acquisition company (SPAC), DiamondPeak Holdings, in October last year. The record share price mentioned above came before this merger, as DiamodPeak was already trading on the NASDAQ exchange.
The data from S3 Partners suggests that by the end of August, short sellers, who borrow and then sell a company's shares expecting its price to drop, profited by $236 million year to date. These losses grew by roughly $7 million during the week which ended the previous Friday, especially since the share price dropped after making gains during August.
August was a good month for the shares, which opened at $6.24 at the start of the month and closed at $6.58. However, this slight gain did not deter the short sellers, who added a little over 3 million shares to the total short interest shares for the company by the end of last week.
According to S3, while the short interest shares stood at 30.8 million in the third week of August, they had risen to stand at 33 million by the end of last week. This increase seems to have served the short sellers well, as by noon today, Lordstown's shares were on a downward trend, maintaining their course shown during this week.
The slight upward momentum in the shares last month came as the company appointed Daniel Ninnivagi as its replacement for Mr. Burns. Mr. Ninnivagi has formerly served as the chief executive of activist investment fund Icahn Enterprises, with industry watchers expecting him tol oversee supply chain and cash flow problems at the company. The appointment came after the company revealed to the Securities and Exchange Commission (SEC) that it had insufficient capital to commence production of its electric vehicles in June.
The shorted shares had dropped during mid August as the share price picked up but, as noted above, increased again as the price dropped during early September.
