Lordstown Motors Corp (NASDAQ: RIDE) dropped 5.45% following the revelation that its executives sold large portions of their shares before releasing financial results. According to accountants and lawyers, such huge sales raise questions regarding the startup’s internal controls, particularly following its recent woes.
Five Lordstown executives sold chunks of their stock
The company’s top five executives, including former CFO and the Lordestown’s president, sold stock worth $8 million in three days at the begging of February ahead of financial results released in mid-March. The company, which went public last year, released its end-year financial for the first time as a public company and reported a net loss of $0.23 per share, which was worse than analyst’s projections. The company which is planning to build an electric truck is yet to commence production of its so-called Endurance truck.
Regulatory documents show that former Tesla Inc. (NASDAQ: TSLA) executive Rich Schmidt who joined the company two years ago, sold 39% of his holdings. In contrast, Lordstown’s propulsion unit head Chuan “John” Vo sold 99.3$ of his holdings for more than $2.5 million remaining with only 717 shares. The company’s spokesperson said that Schmidt used part of the $4.6 million in proceeds for his sale to expand a turkey hunting venture in Tennessee.
Share sale raises questions among analysts and securities lawyers
The manner of the sale raised eyebrows among analysts, accountants, and securities lawyers who are questioning the timing of the sale. Usually, insiders are not supposed to sell their holding for a certain period after going public, but Lordstown executives did it anyways.
InsiderScore analyst Max Magee said that it is surprising that the executives sold their holdings when Lordstown was about to release its results. The size of the stock sold by executives months after Lordstown went public is alarming and shows that investors don’t have confidence in the EV-truck startup.