The Bankruptcy of Lordstown Motors [RIDE]

hey quick heads up before we get into

the details of the Lordstown bankruptcy

it's worth noting that there has been a

history of companies that say they're

filing for bankruptcy going kind of

viral and trending in the stock market

community and becoming basically meme

stocks so in the short term sometimes

there can actually be some good

opportunities to swing trade these

bankruptcy plays do keep in mind you

probably generally don't want to hold

these for the long term as they often

end up burning shareholders however

there is one example that people keep

referring to as shareholders not getting

burned and that was the Hertz bankruptcy

but one of the things you have to

remember that made hurt so valuable

during its bankruptcy during covid was

they had thousands of used cars on their

balance sheet and even though their

business went to trash what became more

valuable during the pandemic used cars

used car prices skyrocketed this is why

shareholders were rewarded in the Hertz

bankruptcy something that's actually

extremely rare however that doesn't stop

other people from saying this is the

next hurts

no Lordstown is not the next hurts and

while I can't give you personal

financial advice I would suggest holding

a company trending towards bankruptcy is

a really bad idea

but let's analyze Lordstown and see

what's going on what they're blaming for

their bankruptcy were they actually

selling any cars what's with this

becoming a finalist out of uh trucks in

America let's talk about all of this now

yes and Friday the coupon expires for

the programs I'm building your wealth

Lordstown Motors just filed bankruptcy I

am really excited to look at what their

latest 10q looks like because I'll tell

you when you look at the investor

relations of a lot of these companies

whether it's uh you know Lucid or even

Neo a lot of these companies are seeing

margins that are so horrible and cash

burn that is so terrible you literally

can't do anything other than probably

file bankruptcy to get out of the

disaster uh that a lot of these

companies have gotten themselves into

and it's unfortunate because

from a high level point of view we

should want every electric vehicle

company to succeed so there's more

competition that's not the way

capitalism Works capitalism doesn't say

everyone succeeds capitalism suggests

the best succeed so uh Lordstown Motors

just announced bankruptcy let's go

through the announcement and after we go

through the announcement Let's uh look

at their latest 10q to analyze if we

could have seen those things coming the

answer's gonna be yes but it's gonna be

quite neat oh and we just got Snowflake

and Nvidia announcing a partnership that

is very smart for snowflake very smart

uh but anyway and I think in video

pretty much partner with anyone

well we'll make you as many chips as you

add but anyway Lortab Motors filed for

chapter 11 bankruptcy early on Tuesday

the struggling electric car maker

Lordstown Motors uh said it would put

itself up for sale amid an ongoing

dispute over Investments that had been

promised by a Foxconn that's the

Taiwanese manufacturer that does a lot

of iPhones and such shares were down 60

in the pre-market following the news

simultaneously with the bankruptcy

filing Lordstown Motors filed a suit

against Foxconn the company accused

Foxconn a fraud and failing to abide by

an agreement that called for the

taiwan-based firm to invest up to 170

million in Lordstown well yeah they're

probably I bet you I bet there were

conditions where Lordstown or Foxconn

was able to say We'll invest 170 mil up

to well it literally says up to so there

had to have been conditions uh and uh

unless you guys suck then we won't

invest it's a Lordstown probably took

that money to the bank even though they

hadn't earned it yet and now they're

like crap we didn't get the money so

Lordstown uh is uh well let's see here

Foxconn

says uh in height of the litigation

it is characterizing the lawsuit by

Lordstown as essentially trying to

mislead the public

Foxconn paid the first 52.7 million due

under the deal last year the next

payment of 43.7 million was due within

10 days of regulatory approval that

approval was secured in late April but

Foxconn never made the payment Foxconn

told Lordstown that the startup reached

the deal by allowing its stock price to

fall below one dollars there it is that

was my expectation that there would be

some kind of uh of of of out that they

would have it's just going to come down

to a contract dispute there but let's

actually look at

the latest 10q and see how the finances

for Lordstown motors have actually

looked

so if we go to let's see cash flow

statement we can see the cash flows so

the nature of a bankrupt company the

cash flow

uh statement shows a net loss of 171

million which is almost double the net

loss you had at the end of March in

2022. note that's 171 million dollars in

three months so consider that for a

moment

171.7 divided by 90. that's a loss of

1.9 million dollars per day could you

imagine burning 1.9 million dollars a

day that's remarkable that's Lawrence

Town Motors for you anyway

they also in this last quarter took an

impairment of their plant property and

Equipment of 114 million dollars so in

other words

they they are essentially admitting

to losing

an entire quarter uh nearly entire

quarter of of net loss or or whatever

they invested in

that's odd uh plant property and

Equipment purchases were only down to

eight uh million dollars here and uh

last year they were at 22 million

dollars in a quarter so they've lowered

their plant property and Equipment

Investments

and they took an impairment on the

Investments they already made

it's not good ordinarily for a growing

company you would see

no impairment on planned property

equipment or or nominal amounts

certainly not that level

and you would see more investments in

the planned property and Equipment not

less

okay so let's look at the income

statement

as expected the company is still a

startup so we don't really have sales

you have

189 000 of sales

you have costs of sales of 31 million

dollars so you just really haven't sold

anything here's that impairment charge

of 114 unplanned property and Equipment

uh research and selling General

administrative all about 14 million

dollars for the quarter

minus the impairment uh you still had a

loss of somewhere around 60 million

dollars

and from a cash point of view the

company only had about 108 million

dollars of cash in terms of the last

quarter they did have inventory of about

70 mil but that decline in inventory

didn't help their cash position at least

compared to last quarter or the quarter

before that in December that's probably

because their current bills

are somewhere around 58 million dollars

longer term liabilities another about 59

mil so they've got bills of about 59

million dollars

they're going to be out of cash

basically this quarter uh they might

have well they'll have enough for maybe

one more quarter but you need to file

now that the quarter is over you're

running out of cash within the next

three months

that's probably why they're filing for

BK protection to protect themselves

against some of these payables so they

can continue to have cash for maybe a

year during bankruptcy to pay salaries

but I I'm not sure that anybody will

actually come in to buy this company

I suppose it depends what uh what the

company would uh

would potentially want to sell and what

IP the company has they don't

necessarily indicate intellectual

property on their balance sheet and

while they've done some beautiful

mock-ups of electric vehicles I mean

look at this this just shows you the

click bait of this kind of garbage look

at this Lordstown Motors finalist 2023

North American Truck of the Year

it happens when you hashtag work for it

what are you talking about

how can a car that's not in production

and a company that's not actually

selling the damn vehicle

actually

win

North American Truck of the Year

how much did they pay to get that

certification who made that

certification let's find out

2023 North American Truck of the Year

Lordstown

so I guess it depends which Journal

you're looking at so it's probably one

of the journals because the F-150

oh maybe it was just a finalist yeah it

was named a finalist and the F-150 uh

actually won well that makes sense

because you could actually buy the darn

thing but uh to be named a finalist yeah

there it is beating out the finalists

Lordstown Motors Evie and the Chevy

Silverado for the top prize

wonder how much they paid just to be

considered a finalist that would be very

interesting to find out but anyway it's

obviously trash given that well the

company's going bankrupt

you can see that here in the uh

restructuring process statement from

Lordstown Motors

uh again it's unfortunate to see this

it's unfortunate to see that you know

they have this fight with Foxconn

they're blaming Fox God but even aside

from the Foxconn nonsense uh oh I didn't

share screen my fault uh that was right

here so here we go there's the Business

Journal this is their uh their front

page right here where you can see the uh

the finalist anyway uh

when you look at their their statement

the the lack of an ability to sell

vehicles

is without a doubt your reason for

failure here you need to be able to sell

something to be able to sustain

otherwise you're just relying on the

stock market to continue to fund your

startup

and that's bad you have to create cash

flow

every truck is a finalist says someone

um anyway so uh stock currently in

pre-market down about 57 on this news I

wonder if other companies are following

the sound like a lucid let's see no

Lucid in pre-markets up actually 4.5

percent you look at an archimoto down

1.3 so you're not really seeing much

stretch anywhere what about like a

Workhorse

no most of the other EVS actually

slightly positive on the day it's really

isolated to Lordstown but uh there you

have it Lordstown and the bankruptcy

filing and uh what's a pretty uh

terrible uh

terribly looking statement set up here I

wonder if they mentioned a going concern

in their last statement

they did not no oh yeah they did

yep they did they did mention a going

concern this is so a going concern is

usually mentioned when a company is

brand new

or they're trading towards bankruptcy

uh like every brand new startup has a

going concern

um

there's yeah look at this as a result of

these uncertainties there's substantial

doubt regarding our ability to continue

as a going concern I mean the writing

was on the wall here that they were

going to file for bankruptcy I mean look

at this it literally says if we're

unable to resolve our dispute with

Foxconn in a timely manner on the terms

aloud now I want you to know this when

it comes to AI

time is what's going to make you money

and if you can prove that value to an

employer you'll always be able to be

employed so this is another way of

making sure that you don't get replaced

but