Lordstown Motors Shares Plunge as Investors See Problems

Mr. Burns’s tenure at Workhorse was decidedly mixed. Workhorse has lost money for years, and its annual revenue was never more than $10 million when Mr. Burns ran the company. One of his initiatives was a bid to supply delivery vehicles to the U.S. Postal Service. While the company was a finalist, it lost to another bidder in February.

Workhorse paid Mr. Burns $1.24 million from 2015 to 2018, according to Equilar, a firm that analyzes corporate compensation. He probably forfeited his stock options at Workhorse by resigning in 2019, but the company gave him a consulting agreement with stock options that Equilar valued at $10.7 million.

What really propelled Mr. Burns and Lordstown was the merger with DiamondPeak.

Backed by some of the principals of the New York investment firm Silverpeak, DiamondPeak raised $250 million from investors when it went public in March 2019, about a year before special purpose acquisition companies became the hottest thing on Wall Street. In securities filings, DiamondPeak said it would probably acquire a real estate business, which made sense because it was led by David Hamamoto, a former Goldman Sachs banker who specialized in that industry.

DiamondPeak decided to buy Lordstown after Mr. Hamamoto was introduced to Mr. Burns in June by Goldman bankers. The deal prospectus said Goldman had known Mr. Burns because of a prior investment banking relationship with him at Workhorse.

Both sides were eager. Lordstown and its backers needed more money, and DiamondPeak was on a deadline to complete a merger to comply with the terms of its initial public offering.

The merger included a fresh investment of $500 million from BlackRock, Fidelity Investments, Wellington Management and others.

Shares of DiamondPeak, later renamed Lordstown Motors, took off even before the merger closed. Some of the sponsors of DiamondPeak were registered in a prospectus late last year to allow them to sell some of their shares in the combined company, along with other investors in the financing deal. Included in the prospectus were some of the bankers at Brown Gibbons Lang, an investment bank, and lawyers with BakerHostetler, a Cleveland-based law firm that reviewed the financing package. Altogether, insider sales have totaled $11 million since the end of December.

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