Is Lordstown Motors the last stockpile of memes? It was a RIDE
Some internet trading enthusiasts are trying to portray RIDE as a ‘meme stock’ – an investment in a struggling company like GameStop or AMC, whose stocks grabbed headlines earlier this year for their bleak outlook followed by increases. meteoric growth in the retail sector. -the merchant inhabitants of the Reddit WallStreetBets table.
LORDSTOWN – Watching Lordstown Motors on NASDAQ has been quite the RIDE lately – and probably not a thrill for those who expect the company to survive.
The stock of Lordstown Motors Corp. (NASDAQ: RIDE) returned to the green on Wednesday after falling late Tuesday, boosted by a “going concern” advisory issued by the company. The boost in confidence appeared to coincide with an afternoon report from Reuters indicating that the company is in talks for new financing.
“We have no debt, we have significant tangible assets and multiple viable means of raising capital, including asset-backed financing, equity, equity or debt-related financing, loans, as well as potential longer-term strategic investments, ”the company said. Reuters. “We are already in active conversation with several parties to do this.”
This is not the first time that the company has mentioned ongoing capital negotiations.
CEO Steve Burns, on an investor call in May, when asked if Lordstown Motors might consider selling to meet its capital goals, said the company was in preliminary talks with “large investors. strategic which would of course bring something more than funding “.
Inside for memes
Some internet trading die-hards are also trying to portray RIDE as a ‘meme stock’ – an investment in a struggling company like GameStop or AMC, whose stocks grabbed the headlines earlier this year for their bleak outlook followed by bulls. dazzling led by retail dwellers of the Reddit WallStreetBets board.
“Meme stocks” are heavily traded stocks with many traders betting on them to lose value. Some RIDErs are waiting for the action to return, seeking to punish those who bet on the EV’s failure to start and go naked in the process.
“The pickup truck market is huge and by releasing production models they would be ahead of Tesla themselves and other competitors,” wrote one WallStreetBets user who claims to own 14,000 shares of RIDE, 9,000 of which were bought on Wednesday after the stock rebounded from its fall on Tuesday.
” Just look [electric vehicle-maker Fisker Inc.] which is worth $ 5 billion without even a test model. Also with [President Joe Biden] in pushing for the electric vehicle market, it would make sense for him to support Lordstown Motors. “
It was a difficult year for its investors.
Shares of Lordstown Motors (NASDAQ: RIDE) have fallen 9 points, or 45%, year-to-date, mostly in the months since a report questioned demand for its all-electric pickup truck, endurance.
In response to the bull RIDE above, another WallStreetBets user called the company “Fraudstown”.
Many investors cashed in their tokens on Tuesday, after the company disclosed its “going concern” notice to investors – signaling that the company is in trouble and its investors are at risk – and reiterated its lack of funding for to reach the commercial production of Endurance then year.
RIDE is one of the top 20 selling stocks right now, according to MarketWatch, with around 31% of its 111 million available stocks currently short.
By the way: the # 1 best-selling short stock, according to MarketWatch? It’s Workhorse Group (NASDAQ: WKHS), a Cincinnati-based electric vehicle maker co-founded by Burns, which owns a 10% stake in Lordstown Motors.
But Redditors love an outsider. It is in these shorts that the “buy the dip” crowd sees the potential to make money.
What is short selling?
“Shorting” a stock is when a trader borrows a stock and then sells it, hoping to buy it back after it declines in value. If the stock fails, the short sellers make money. What the bullish Reddit traders who catapulted GameStop shares to over 700% in a week in mid-January are counting on is what is called a “short squeeze.”
This happens when too many available shares of the stock have been sold short. When a stock’s price rises, its short sellers lose money. To get out of their bad bets, they have to buy more stocks to cover the stocks they borrowed. Sometimes there aren’t even enough stocks to buy back and they get trapped. This creates a feedback loop, as the Associated Press reported, pushing a stock price “to the moon,” a term often punctuated with rocket emojis.
One of Lordstown Motors’ short sellers is Hindenburg Research, the market research firm which alleged that the EV company’s 100,000 book of alleged pre-orders was largely fictitious and would not reach not his September production target.
For those scoring at home, a week after Hindenburg’s report, CEO Steve Burns revisited an earlier claim that the company had “very serious orders” for Endurance – classifying them as “letters of” ‘soft intent’ in an interview with CNBC – and during the May investor call, he announced that he was cutting his first Endurance run in late September to 1,000 units in half and that the company would need additional capital to achieve commercial production.
“You realize all it takes is people buy and keep,” wrote another Redditor on the Lordstown Motors subreddit. “The company could go bankrupt and the share price should have no reason to go up, but as long as people buy and hold we can control the market however we see fit. This market is more emotional than ever.
Some Redditors believe Tuesday’s report on Lordstown Motors’ cash crunch – first reported by the the Wall Street newspaper – was a ploy started by short sellers looking for a quick drop in RIDE, so that they could get rid of their short positions before the stock started to gain and they started to lose money ‘silver.
Others believe Lordstown Motors’ recent addition to the Russell 3000 stock index – which takes effect right after the startup’s next investor open house the week of June 21 – could attract a new wave of institutional investors. and drive up the share price further.
Some WallStreetBets posters stated that the Lordstown Motors Redditors were “fooled” about the viability of the business or looked like a cult.
Regardless, a Forbes Wednesday’s contributor cautioned traders against short selling RIDE at this time.
“If they decide to coordinate their efforts to buy Lordstown … Redditors could cause a short squeeze that would push his shares up. From there, Lordstown could sell shares and raise the capital it needs, ”wrote Peter Cohan.
“I think selling short… is an effective way to profit from a business that is heading for bankruptcy,” Cohan continued. “However, a short squeeze along the lines of what happened with GameStop and Clover Health seems possible to me with Lordstown.”
In Lordstown Motors’ filing Tuesday with the U.S. Securities and Exchange Commission, the company told investors that its need for new funding created “substantial doubt” that the company could continue “as a ‘company’ or be able to manufacture Endurance in 2022 and beyond. .
Shares of Lordstown Motors (NASDAQ: RIDE) quickly fell more than four points in the last half hour of trading, to close at $ 11.22 per share, down nearly 20% from its Tuesday opening of $ 13.82 per share.
The stock rebounded Wednesday to close at $ 11.23 per share.
Although Lordstown Motors has long been touted as a crown jewel in Mahoning Valley’s efforts to rebrand the Rust Belt community as a hub for vehicle electrification, its volatile outlook has cast doubt on it.
As traders do their best to play with the system for profit, the potential infusion of local new collar jobs by the company is at stake.
But Howland’s US Rep. Tim Ryan, D-13th, reminded on Wednesday that Lordstown Motors is not the only good thing for Voltage Valley.
“Without a doubt, the news coming out of Lordstown Motors is concerning, and while I will continue to use my position to help them where possible, it is important to remember that they are part of a larger movement that transforms our region into what was invented. like Voltage Valley, ”Ryan said in a statement to Mahoning questions.
“Among the incredible work done at BRITE Energy Innovators; the Ultium Cells LLC electric battery plant in Lordstown, which will be operational early next year and is expected to create 1,100 new high-tech jobs; and the many EV supply chain companies that the Youngstown / Warren Regional Chamber currently supports – our community is still driving the jobs of the future.