Will Lordstown Motors’ debacle affect electric vehicle ETFs?
IIn the latest episode of trouble for Lordstown Motors, the electric car company that operates out of a former GM plant, the company said on Monday that CEO Steve Burns and CFO Julio Rodriguez had stepped down. Lordstown is actively looking for permanent replacements.
The resignations come amid an ongoing internal investigation into the company’s operations into allegations by short seller Hindenburg Research that it misled investors. The Securities and Exchange Commission intends to review Hindenburg’s claims as well as the company’s merger with SPAC DiamondPeak Holdings.
Hindenburg blamed Lordstown in March for using “bogus” orders to raise capital for his electric truck. The short seller said the vehicle is far from production ready, but Lordstown has said it is on track to start production this fall.
Morgan Stanley analyst Adam Jonas said the change in leadership is “an important first step in moving the business forward,” including securing the new capital needed.
“We felt it was untenable for the company to secure the necessary new capital with a management team widely seen as potentially not leading the company into the next era of its development,” he said. Monday in a note to investors.
According to the Lordstown website: “Endurance pickup trucks are made in America at our headquarters in Lordstown, Ohio. In addition to our experienced management team of automotive executives from You’re here, Toyota, GM, VW, Hyundai and more, we will also take advantage of a skilled local workforce at this legendary manufacturing facility to build our electric trucks. “
The cyber-truck revolution has been tough for Lordstown, whose shares were already down more than 40% in 2021 before Monday’s announcement, since the company, which went public in 2020 through a merger with a Special Purpose Acquisition Company (SPAC), is struggling to expand Endurance production.
Lordstown stock fell 18% more on Monday morning.
But the market for electric trucks has become more and more competitive in recent times. A number of companies are entering the space, including Ford, which is launching an electric version of its hugely popular F-150, which it calls the Lightning, and electric vehicle pioneer Tesla, which is in the process of launching. create a cut-edge, an electric pickup called a Cybertruck. GM has also entered the foray, with plans to release an electric Chevy Silverado.
This may be good news for equity and ETF investors looking to capitalize on the electric vehicle revolution.
Last year, consumers spent US $ 150 billion on electric cars, more than double the previous year, while government support measures continued to decline for the fifth year in a row. This indicates growing consumer demand for electric vehicles, a demand that is not dependent on government subsidies for growth. “Although they cannot do the job on their own, electric vehicles have an indispensable role to play in achieving net zero emissions in the world,” Fatih Birol, IEA executive director, said in a press release.
He went on to say that “current sales trends are very encouraging, but our common climate and energy goals call for even faster market adoption.”
This means that ETFs like the ETF Global X Autonomous and Electric Vehicles (DRIV), ETF ARK Innovation (NYSEArca: ARKK), ETF KraneShares Electric Vehicles and Future Mobility (NYSE: KARS), and more could benefit from the new electric trucks.
According to KraneShares website, “55% of new car sales and 33% of the world’s vehicle fleet are expected to be electric by 2040.” The global electric vehicle market is expected to reach $ 2.7 trillion by 2040.
the ETF KraneShares Electric Vehicles and Future Mobility (NYSE: KARS) Measures the performance of the Solactive Electric Vehicles and Future Mobility Index, an index that tracks companies that make electric vehicles or parts, as well as companies that strive to change the future of travel.
KARS allocates 39% of its portfolio to consumer discretionary stocks, nearly 34% to information technology stocks, 11% to industrials, 8% to materials and 6% to communications services.
KARS, which has net assets under management of $ 206 million, has recorded $ 108 million in net inflows since the start of the year.
Lordstown said its lead independent director, Angela Strand, has been appointed executive chairman and will manage the company’s transition until a permanent CEO is announced. The company has also appointed Becky Roof as interim CFO, effective immediately.
The company is expected to welcome media, investors, analysts and others next week to its Ohio plant. Strand said those plans are still in place.
“We remain committed to achieving our production and marketing goals, to meeting the highest operating and performance standards, and to creating shareholder value,” she said in a statement. “Together with the management team, I will continue to work closely with them and the Board of Directors to implement Lordstown’s vision for the future of electrified transportation. “
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