Lordstown Motors is an electric vehicle startup that can’t seem to catch a break. After investing in the startup not too long ago, General Motors has sold all of its stake in the company. This isn’t good news for the startup, though GM didn’t own a majority of the company or anything. Here’s why General Motors sold its stake in Lordstown Motors, also known as “not Rivian.”
General Motors stake in Lordstown Motors
According to CNBC, General Motors invested in Lordstown Motors as part of the sale of an Ohio plant and a SPAC deal last year that took the startup public. Moreover, GM owned 7.5 million shares of common stock, with an equity value of $75 million. GM’s stake was less than 5% of Lordstown Motors’ total. General Motors sold its stake in the company during the fourth quarter of last year.
Jim Cain, a spokesperson for GM, justified the original purchase of Lordstown Motors stock by saying, “Our objective in investing was to allow them to complete the purchase of the plant and restart production.” Previously, the Ohio plant was used by and then closed down by General Motors. Now, it’s in the process of building the Lordstown Endurance electric pickup truck. It’ll be the first model available from the startup, and they plan to build 500 production models and deliver them this year. That number will only ramp up a bit to 2,500 for the following year.
Why did GM sell its Lordstown Motors stake?
Jim Cain declined to share when and why General Motors decided to offload its stake. However, the announcement comes curiously close to Lordstown’s low production numbers going public. According to CarScoops, a little less than a year ago, the startup promised 1,000 units in 2021. Moreover, that was less than half of the original promise of 2,200 Lordstown Endurance models. This all came around the same time the SEC investigated the company, Lordstown lost more than $120 million, and appointed a new CEO.
In short, Lordstown Motors has had a rough go of it for the last few years. It doesn’t seem like anything can go right for the startup at the moment. Although we don’t know for sure, these events must contribute to General Motors’ decision to sell its stake. To sum up, even when you’re worth millions of dollars, it isn’t all sunshine and daisies.
Is Lordstown Motors going to be OK?
One thing that’s gone well for the company is its partnership with Foxconn. Last year, the two partnered up in a deal that would cause Foxconn to acquire the Lordstown plant and help build its future truck. Consequently, the current CEO of Lordstown Motors called it “a critical component of the brand’s future,” which seems to be underselling it with the way things have gone.
The news of GM’s stake sale hit Lordstown shares hard initially. However, since then, the company is up 4.67 percent and seems to be back on track. While the marketing, resources, and of course, the money of General Motors would be beneficial, Lordstown Motors wasn’t going to get any of that from GM anyway. The automotive industry titan only owned less than five percent of the startup, so it isn’t a devastating loss, though it’s a tough one.
Previously, it came out that GM lost a bidding war to Ford trying to acquire part of Rivian. Was Lordstown Motors GM’s attempt at a consolation prize? Lordstown might make it as an automaker and could create waves in the electric pickup industry. However, Lordstown Motors is certainly no Rivian. That’s why General Motors sold its stake in Lordstown Motors.