The Feds Are Sniffing Around the EV Space…And They Should Be

The Securities and Exchange Commission has opened an investigation into electric delivery-truck maker Ohio-based Workhorse Group, a company that was an early investor in plagued EV startup Lordstown Motors.

Workhorse EV Vans (Source: Workhorse)

The SEC disclosed in a letter denying a public-records request that its enforcement division has been probing Workhorse. The SEC did however indicate that the investigation is ongoing.

“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 however, doesn’t say what the investigation entails 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 without a noted explanation.

The Workhorse probe is the fourth disclosed investigation into an electric-vehicle maker in the past year. A year marked by record breaking investment activity and highly active public markets with the return of black check public companies. Investors have piled in head first into the EV space as they scramble to grab a taste of the possibly Tesla sized returns.

This is, however, the second involving a company started by Steve Burns, the founder of Lordstown Motors, another Ohio-based startup focused on electric trucks that took over a GM plant two years ago. Mr. Burns created Lordstown just months after leaving Workhorse in 2019.

Lordstown Motors is also being investigated by the SEC, as well as the DOJ 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.

Burns took Workhorse public in 2010, on OTC then later bumping up to Nasdaq in 2016, with Burns as CEO. The company has spent over a decade working to develop electric delivery vehicles to sell to delivery services such as UPS and FedEx. Like Lordstown, Workhorse has struggled over the past few years missing targets, executive turnover, and money troubles, according to company notes, statements, and filings.

In July, Workhorse suspended earlier guidance that it aimed to deliver 1,000 vehicles in 2021. In August, the company said it had sold 14 vans in the second quarter and planned to redesign its flagship model in response to negative consumer feedback about its cargo capacity.

Earlier this year, Workhorse missed out on a multibillion-dollar contract when the U.S. Postal Service selected Oshkosh Corporation to replace its aging fleet of delivery vehicles. The truck company has challenged the contract decision, alleging the Postal Service of contract steering “put its thumb on the scale against Workhorse. The company’s shares plummeted on the news of the contract loss down over 76% from an all-time high in February.

Duane Hughes, who replaced Burns as CEO in 2019, stepped down earlier this summer. Workhorse also said the following week that its vice president of finance and its general counsel were leaving the company. Raising further questions to the government's inquiry. Richard Dauch, a veteran auto industry executive who led Delphi Technologies, recently took over as Workhorse’s CEO.

In addition to sharing a founder, Workhorse was an early investor in Lordstown Motors. Until recently, it held a 9% stake in the EV startup. Last month it disclosed it had sold off nearly three-quarters of its Lordstown shares prior to its mass staff departure, netting $79 million in gains. Lordstown also licenses technology from Workhorse for its pickup, and several former Workhorse executives joined Burns at Lordstown Motors.

Lordstowns’ current executive chairwoman, Angela Strand, was formerly a vice president at Workhorse executive until 2018. Lordstown Motors last week named a new CEO, Daniel Ninivaggi, a longstanding auto industry executive and former lieutenant to billionaire investor Carl Icahn.