Executives at Lordstown Motors, the flailing electric truck startup, sold a lot of stock in February, according to a new report, not long before a short-seller issued a damning report on the company.
According to The Wall Street Journal, the size and timing of the executives’ stock sales is pretty unusual.
One of its executives, Chuan “John” Vo, who oversees Lordstown Motors’ propulsion division, sold almost all of his vested equity—99.3%—on Feb. 2, leaving him with 717 shares and proceeds of more than $2.5 million, the filings show.
President Rich Schmidt, a former Tesla Inc. manufacturing executive who joined the company in 2019, sold 39% of his vested equity over two days in February for $4.6 million, according to company filings. He used some of the proceeds to expand another venture that he had started recently, a turkey-hunting farm in Tennessee, a company spokesman said.
Three other executives, including Lordstown Motors’ former finance chief, who resigned last week, sold smaller holdings around the same time in February with the transactions ranging between roughly $250,000 and $400,000 in value, filings show.
Four of the five executives declined to comment through a Lordstown Motors spokesman. The company also declined to comment on its financial oversight of executives. The fifth, former Chief Financial Officer Julio Rodriguez, couldn’t be reached for comment.
The Wall Street Journal also talked to experts who said that that normally public companies have controls to stop executives from selling stock near when earnings reports are released. This is presumably to prevent executives from trading on nonpublic information.
In Lordstown’s case, its executives sold their stock around a month before Lordstown’s fourth-quarter 2020 earnings report, which was bad and sent its stock tumbling further. None of this seems “normal,” in other words, though you don’t need to be a rocket scientist to figure out that, when executives in a company dump a lot of their stock less than a year after their initial public offering, it could indicate that something’s up.