Special Purpose Acquisition Companies (SPACs) are falling out of vogue and Lordstown Motors (NASDAQ:RIDE) is no exception.

The stock peaked at $31.80 back in February before falling when the Nasdaq index broke down. Bears, too, are all over RIDE stock, with a short interest of 30.82%.

An ugly quarterly earnings report further validates the bearish bet against this electric vehicle truck supplier. Sell Lordstown Motors stock today.

RIDE Stock Free-Fall Explained

Ahead of its quarterly earnings report, Lordstown Motors exited the San Felipe endurance pickup truck race the month before. It dropped out after stage one because its team incorrectly calculated pre-race estimates for energy consumption. Since their vehicle would likely fail to make it past stage two, the company dropped out.

The San Filipe race is a good benchmark for Lordstown’s EV. The grueling desert terrain required four times the normal level of electricity. The team estimated only a three-fold energy usage.

In the first quarter, Lordstown posted a net loss of $125 million. Capital expenditures topped $53 million. The company ended the quarter with $587 million in cash.

High Cash Burn

The Q1 net loss implies that Lordstown will run out of cash in four quarters. Shareholders should assume the worst-case scenario ahead.

First, the failed San Filipe race will result in higher research and development activities. That will increase quarterly costs. Second, assume the company will push back the start of production (“SoP”) set for late-Sept. 2021.

Lordstown said the SoP is on schedule, however. It already completed the construction of 48 out of the 57 prototypes. It will start pre-production vehicle (“PPV”) building in July.

The Opportunity

Investors shouldn’t lose all hope with RIDE shares. The company has already passed two of the most challenging crash tests — frontal and pole. It installed the first phase of its battery line. In July, it will start its first electric hub motor line.

Lordstown is ramping up activities to meet critical milestones next. As shown on slide 12, PPV will start this summer. SoP in Sept. is a critical milestone. From there, the company may ramp up production, albeit in limited volumes.

On the conference call, CEO Steve Burns addressed the higher expenses in the quarter. He said that R&D-related efforts faced higher costs than anticipated. For example, outside validation and brake testing cost more than expected.

With those costs out of the way, Lordstown will validate vehicle safety next. Fortunately, the chip shortage did not affect input costs, as the company has two different suppliers under contract.

In-house unit production will enable Lordstown to manage costs. It only needs to continue meeting regulatory requirements.

The Risks

Given the ongoing costs and limited near-term revenue, investors should expect a capital raise next. The company has no debt, so it could tap an asset-backed line.

Conversely, the stock market is still somewhat receptive to EV companies. It could issue more shares, which hurts existing shareholders. This would keep debt at zero and come without financing costs.

As rates head higher in the next year, Lordstown will likely avoid selling debt. And unless the stock market corrects sharply, chances are high that it will sell shares to raise cash.

Your Takeaway

Analysts are bearish on RIDE shares, with a one-year price target well-below $10 (per Tipranks). The company faces mounting costs. It cannot afford any delays in its project timeline. Any slippage will increases costs and undermine hopeful investors.

Still, a project delay is better than failing to meet regulatory requirements.

Investors seeking exposure to the EV market should take a pass on RIDE stock. The company is a speculative play facing meaningful risks ahead.

Investors could instead consider General Motors (NYSE:GM) for its EV strategy. Still, the upside is limited there, too. In that case, wait for a pull-back on GM stock to erase the EV-related hype priced in its shares.

Conversely, with Lordstown and RIDE stock, the downside risks ahead are too much.

On the date of publication, Chris Lau 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.

Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.