Startups

As Lordstown immolates, SPAC deals that didn’t go to zero feel like the exception

Comment

Businessman using fire extinguisher on laptop computer that is in flames
Image Credits: PM Images / Getty Images

In 2020 and 2021, we had several months when enthusiasm for new EV manufacturers was crossed with the resurgence of blank-check companies. Also called special purpose acquisition companies, or SPACs, these listed shell companies promised quick access to capital and a path to the public markets, and a wide array of tech and tech-ish companies took them up on the offer.


The Exchange explores startups, markets and money.

Read it every morning on TechCrunch+ or get The Exchange newsletter every Saturday.


In 2020 and 2021, several electric vehicle companies took the SPAC route to raise quick cash and go public, especially because investors were pretty OK with investing in such experimental transactions. Full of enthusiasm, these companies’ investor presentations showed a clear path to production and stellar profits.

It’s obvious in retrospect, but the results often proved to be messy.

U.S.-based EV company Lordstown Motors is one such example. Today, the company filed for bankruptcy protection and sued its former partner Foxconn at the same time. As TechCrunch reported earlier this morning:

Lordstown Motors has made good on its threat to sue Foxconn, the Taiwanese company best known for manufacturing Apple’s iPhones. The EV company took legal action against Foxconn Tuesday, and simultaneously filed for bankruptcy and put itself up for sale. […]

In its complaint, Lordstown says Foxconn misled the EV maker about collaborating on vehicle development plans and was “not the partner that it promised to be.” The complaint accuses Foxconn of pretending to support the Endurance pickup truck and future joint product development in order to secure ownership over Lordstown’s most valuable asset, the Ohio manufacturing plant, and to poach some of Lordstown’s skilled manufacturing and operational employees.

It would be easy to dismiss Lordstown’s failure as the result of a dispute between the two companies. But that would be wrong. In reality, the Lordstown saga is a blend of pure SPAC nasty. Let’s take into account a few pertinent facts to form our opinions.

Lordstown’s SPAC journey

TechCrunch’s reporting on Lordstown has been voluminous and broad, so if you want the true blow-by-blow, please start here. For everyone else content with a summary, allow me:

  • The Lordstown SPAC deal, as pitched to investors, estimated that it would generate revenue of $118 million in 2021, $1.69 billion in 2022, $3.48 billion in 2023, and $5.78 billion in 2024.
  • The presentation also forecast that the company would generate positive EBITDA in 2022 (page 24).
  • Lordstown also said that there were no “additional capital requirements expected between [its] PIPE and going to market, [or] achieving positive cash flow.”

Investors gobbled that story up faster than a star-nosed mole could. The company’s stock then shot up to a multiple of its pre-combination SPAC price, buoyed by statements like the following when the company closed its merger with SPAC DiamondPeak Holdings in late 2020:

We have a near production-ready plant and approximately $675 million in proceeds from this transaction, which is more than enough funding to get us through initial production.

Lordstown had lots of fresh capital, a seemingly solid plan and a public stock that was doing well. What could go wrong?

Apparently a lot, as described by this trio of TechCrunch headlines from the following months:

In late 2021, Lordstown said it planned to sell its plant to Foxconn in a multistep deal.

But even after going through all of that, it appears it didn’t even have its production in place:

  • Through Q3 2022, Lordstown had generated no revenue, as it had only started up production of its EV pickup in that period.
  • In Q4 2022, Lordstown announced further agreements with Foxconn, what it described as an investment “of up to $170 million, subject to certain conditions [with the] initial $52 million funded.” The EV company closed last year with revenue of $194,000.
  • In Q1 2023, Lordstown generated revenue of $189,000. It detailed a host of issues with Foxconn that, in its view, showed it was being wronged. Those matters have apparently come to a head, leading the company to sue its old partner and descend into bankruptcy.

So much for having enough capital and being “near production ready” back in 2020.

It’s even funnier that Lordstown’s SPAC deck estimated that the company would generate revenue of $5.17 billion in 2022 and 2023. Instead, the company generated revenue of $383,000 in calendar 2022 and Q1 2023 combined. That’s quite a miss.

I know that regulation lags the market, but holy hell, what was all this? It’s not a popular position to take, but surely this is a place where we need more active and muscular regulation. And it should not be post-fact, but pre-listing.

I don’t know if the folks working on the myriad SPAC deals that incinerated value are sleeping well. I would not be able to. A lot of regular people got hosed by SPACs that talked a big game but fell apart once they had to live up to their own hype. That’s just not acceptable.

More TechCrunch

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

2 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

2 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo