Lordstown Motors (NASDAQ:RIDE) stock has had a tough month, to be sure.
Almost a month to the day, RIDE took its Endurance EV truck out on the highway for its initial test drive. It caught fire and left a shell of smoking metal.
That follows a report from Hindenburg Research – a short-side research firm that made its name outing some sketchy practices at then-high-flying EV tractor truck maker Nikola (NASDAQ:NKLA).
No company wants to be the next Hindenburg subject, but RIDE got the inglorious honor. It has claimed the RIDE stock’s preorder numbers are suspect. Fundamentally, it claims the numbers are softer than people would expect.
But the EV industry has a history of talking big pre-order numbers. None other than Tesla Motors (NASDAQ:TSLA) did it for its EV truck preorders, offering $100 fully refundable deposit for its trucks. It has since stopped publishing those numbers.
But TSLA stock isn’t a newcomer, and its CEO is one of the most visible corporate leaders on the planet. He’s not someone you want to pick a fight with unless you have plenty of capital.
A Different Kind of Ride
RIDE stock is altogether different, just coming to market in early August 2020 via a merger with a special purpose acquisition company (SPAC). It has great promise and has been champing at the bit to see if it can make it in the EV boom that happening right now.
Its unique design is an all-wheel drive commercial pick-up truck with an in-wheel drive system. That means each wheel powers itself and there’s not a tradition drive train or transmission.
That means, there are only effectively four moving parts to RIDE’s truck transmission opposed to a traditional complex system of gears and parts. That efficiency means less wasted fuel and fewer moving parts means less maintenance.
Its goal is to bring on commercial and fleet customers first, since they’re likely to buy a number of trucks at a time. But I’m betting it won’t shy away from selling consumers trucks.
A Bumpy Start to RIDE Stock
All this, and the fact that it bought an old GM manufacturing plant in Lordstown, Ohio, which the company has now dubbed Voltage Valley.
RIDE stock’s entire backstory made it one of the more anticipated EV makers to go public. But being in the spotlight means it’s easier for critics to point out flaws as well and get a bigger audience themselves.
The preorder issue was annoying at best, and that scared investors away. And then last month’s disastrous test drive.
RIDE stock has hit highs above $30 twice since its public debut, the last time was Feb. 11, when the broad market sold off, with RIDE with it.
Out of the Fire and On to Baja
But these things happen to developmental companies. Failures occur. Tesla continues to address battery fires and other issues. It’s all part of managing new technologies. There’s no progress without failure.
On the cash side, RIDE stock is well funded to hit its September launch date, so that’s not an issue. And if the preorder issue is more hype than fraud, it wouldn’t be the first time someone has tried to boost their company’s fortunes with a little aggressive marketing.
The next big show for RIDE stock was its entrance in the SCORE International 250 San Felipe race across Baja, Mexico April 14-18. Its Endurance pick-up is going to show its stuff in this grueling race.
The Bottom Line
See how well the Endurance does in this race and if there’s any deeper issues with the preorder stuff. At around $11, it’s worth some risk capital.
On the date of publication, GS Early did not have (either directly or indirectly) any positions in the securities mentioned in this article.
