A year ago, electric vehicles (EVs) were a promising sector for investors. But in 2021, that all changed. Sponsors of special purpose acquisition companies (SPACs) flooded the market with new EV stock investments. Some of these, like Lucid Motors (NASDAQ:LCID), have worked out pretty well. Most, however, have been terrible for investors. Unfortunately, Lordstown Motors (NASDAQ:RIDE) falls squarely in the latter category.

Lordstown started out with a ton of promise. It was going to bring clean and green manufacturing jobs back to Ohio. Prominent politicians gave photo ops with management in front of a spiffy-looking truck. Things seemed perfect. Then it all went wrong.

Questionable Orders

Influential short seller Hindenburg Research took aim at Lordstown earlier this year in a blistering report. Hindenburg made several key allegations. One was that Lordstown’s truck model was far from ready and that engineers were still making major revisions to it recently.

Any discussion of Lordstown also must mention Workhorse (NASDAQ:WKHS). Lordstown’s then CEO, Steve Burns, previously headed up Workhorse. Under his watch, according to Hindenburg, Workhorse accumulated dubious pre-orders that never amounted to much actual revenues. Workhorse’s involvement in bidding for a contract with the U.S. Postal Service also led to controversy.

If Hindenburg is correct, Burns has repeated this past behavior at Lordstown. Allegedly, Lordstown used a lot of questionable tactics to get buyers to commit to pre-orders that weren’t actually likely to become real vehicle sales. Lordstown was not able to refute these allegations credibly. Instead, Burns resigned as Lordstown CEO following the Hindenburg report, and the firm’s CFO also stepped aside. That leaves the company without its prior management team, and with serious concerns around the viability of its purported business model.

Desperate Search For Funds

Earlier this summer, Lordstown agreed to sell up to 35 million shares of stock in an offering. The buyer will be YA II PN, LTD, which is an affiliate of Yorkville Advisors Global. YA will not be required to be a long-term investor in Lordstown. In fact, it will be able to sell stock even before it purchases it. From the SEC filing, it states that: “YA may sell shares that it is obligated to purchase under such Advance Notice prior to taking possession of such shares.”

In other words, this is a dilutive financing arrangement that will likely work out well for YA but not nearly as well for common shareholders. Lordstown hopes to raise $400 million from this offering. However, with the stock price currently below $8, selling 35 million shares would come up well short of that $400 million aim. In any case, given the lack of an operating business, this dilutive financing will hardly be the last one for Lordstown.

It’s not just a few skeptics or short sellers complaining about the balance sheet, either. Joseph Spak, of RBC Capital, slashed his price target for RIDE stock to a shocking $1 per share in August. Spak made this move on the expectation of massive amounts of dilution going forward. Spak suggested that Workhorse would need to raise an additional $1.4 billion in coming years.

That could be a tall order given the company’s lack of revenues and its scandal-tainted history. Also, it appears that legacy automakers such as Ford (NYSE:F) may get their rival EV trucks to market before Lordstown is able to. That will further dim the company’s already cloudy outlook.

RIDE Stock Verdict

The recent 50% rebound in RIDE stock is a golden opportunity to sell this busted EV company. Yes, I know many people invested at a higher price than the current $7.50 levels for Lordstown and don’t want to sell until it reaches breakeven. However, RIDE shares recently traded below $5. The company doesn’t have revenues, profits, or even much real proof that the business model is sound. On a broken investment like this, don’t be afraid to get your capital out on any sort of rally.

Making matter worse, the company that Lordstown was closely tied to, Workhorse, has been a fiasco and gotten caught up in all sorts of scandal as well. As the adage goes, “The apple doesn’t fall from from the tree.” Given Steve Burns’ prominent past involvement at both companies, analysts are rightly skeptical of its corporate offspring, Lordstown.

In any case, with such a huge variety of EV stocks available, investors should steer clear of Lordstown. Shareholders that stick around are bound to experience a bumpy ride.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.