PROBLEMS here Bigly !!???
SEC Is Investigating Electric Delivery-Truck Maker Workhorse -- 2nd Update
5:01 pm ET September 1, 2021 (Dow Jones)
By Ben Foldy
Financial regulators have opened an investigation into electric delivery-truck maker Workhorse Group Inc., an Ohio-based firm that was an early investor in now-struggling startup Lordstown Motors Corp.
The Securities and Exchange Commission disclosed in a letter denying a public-records request that its enforcement division has been probing Workhorse, according to a copy of the letter reviewed by The Wall Street Journal.
"We have confirmed with the Division of Enforcement staff that the investigation from which you seek records is still active and ongoing," the letter, dated June 30, said.
The letter doesn't say what the investigation concerns or offer any further details. A self-described short seller said he submitted the original records request under the Freedom of Information Act in April. A redacted copy of the SEC's written response was also included in a report he published Wednesday.
The SEC's public log of FOIA requests shows a record of the public-records request and that it was denied, but doesn't provide further information.
A Workhorse spokesman didn't comment.
Shares in the company closed Wednesday down 6.8% at $9.14.
The SEC's probe into Workhorse, a firm founded in 2007 to make battery-powered delivery vans and trucks, is the fourth known investigation into an electric-vehicle manufacturer in the past year.
It is also the second involving a company started by Steve Burns, an entrepreneur who also founded Lordstown Motors, another Ohio-based startup focused on electric trucks that took over a former General Motors Co. plant two years ago. Mr. Burns established Lordstown Motors within months of leaving Workhorse in 2019.
Lordstown Motors is also being investigated by the SEC, as well as the Justice Department. In June, it disclosed the SEC had subpoenaed materials and information related to its deal to go public last fall and preorders for its forthcoming electric pickup truck, the Endurance. The company in July confirmed the Justice Department probe.
A lawyer for Mr. Burns said he hadn't been contacted by the government regarding either investigation. Lordstown Motors has said it is cooperating with the investigations.
Workhorse hasn't disclosed the SEC's probe into its business in its public filings.
Publicly traded companies aren't legally required to disclose federal investigations into their business. A recent study in the academic journal Management Science found that 19% of public companies initially report such probes to investors
Marc Steinberg, a professor specializing in securities law at Southern Methodist University, said that if an enforcement action is possible, then it is best for the company to disclose it as a material event.
"It's important to investors," Mr. Steinberg said.
Upstarts targeting the transportation sector emerged as some of Wall Street's hottest investments last year, driven in large part by investors trying to replicate Tesla Inc.'s big returns.
Some of these entries, including Lordstown Motors, merged with special purpose acquisition companies, or SPACs, to go public, a route that allows them to list without going through the traditional IPO process.
Mr. Burns took Workhorse public in 2010, when it first listed on OTC markets. The company listed on the Nasdaq in 2016, with Mr. Burns as chief executive officer. It has spent more than a decade working to develop electrified vans and trucks for sale to parcel-delivery services such as United Parcel Service Inc. and FedEx Corp. and other work fleets.
Like Lordstown Motors, Workhorse has struggled over the past few years with missed targets, executive turnover and a squeeze on cash, according to company statements and filings.
In July, Workhorse suspended earlier guidance that it aimed to deliver 1,000 vehicles in 2021. On Aug. 9, the company said it had sold 14 vans in the second quarter and planned to redesign its flagship model in response to consumer feedback that it couldn't carry enough cargo.
Earlier this year, Workhorse missed out on a potentially multibillion-dollar contract when the U.S. Postal Service selected Oshkosh Corp. to replace its aging fleet of delivery vehicles. The truck company has challenged the contract decision, alleging the Postal Service "put its thumb on the scale against Workhorse."
The company's shares tumbled following news of the contract loss, and as of Tuesday's close had fallen 76% from an all-time high of $41.34 set in February. The stock fell sharply early afternoon Wednesday but more recently was up about 1%.
Duane Hughes, who replaced Mr. Burns as CEO in 2019, stepped down at the end of July. Workhorse also said the following week that its vice president of finance and its general counsel were leaving the company.
Richard Dauch, a veteran auto industry executive who led auto-supplier Delphi Technologies, recently took over as Workhorse's chief.
In addition to sharing a founder, Workhorse was an early investor in Lordstown Motors. Until recently, it held a 9% stake in the electric-truck startup. Last month it disclosed it had sold off nearly three-quarters of its Lordstown Motors shares since July, netting $79 million in proceeds.
Lordstown Motors also licensed technology from Workhorse for its pickup, and several former Workhorse executives joined Mr. Burns at Lordstown Motors when it was established.
Lordstown Motors' current executive chairwoman, Angela Strand, was a vice president at Workhorse executive until 2018. Lordstown Motors last week named a new CEO, Daniel Ninivaggi, a longtime automotive industry executive and onetime lieutenant to billionaire Carl Icahn.
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