Signage in front of Lordstown Motors Corp. in Lordstown, Ohio on Saturday, May 15, 2021.
Dustin Franz | Bloomberg | Getty Images
Electric vehicle launches Lordstown Engines dropped sharply after the corporate revealed on Monday that its financing deal with Foxconn was in jeopardy – and that it could go bankrupt if the deal didn’t undergo. Shares fell greater than 40% in early afternoon trading.
Lordstown said on Monday regulatory filing that on April 21, he received a letter from Foxconn claiming that the startup was in breach of an investment agreement because its stock fell below $1 per share for 30 consecutive trading days, leading to a NASDAQ delisting.
The struggling startup struck a deal last 12 months to sell its Ohio factory to a Taiwanese contract manufacturing giant. Following this deal, which closed in May 2022, the 2 firms agreed to a second deal through which Foxconn will invest as much as $170 million in Lordstown, representing a 19.3% stake.
Foxconn paid the primary $52.7 million owed under that deal last 12 months, but the rest – and the deal itself – is now in danger.
Under the terms of the deal, Foxconn is to speculate $47.3 million inside 10 days of approval by america Foreign Investment Commission. Lordstown said that approval was secured on April 25, meaning Foxconn is required to make this investment by May 8.
Lordstown said it is worried that further investments won’t come before that date, and Foxconn doesn’t look like making an excellent faith effort to finish the EV plan, which is one of the deal’s milestones.
The 2 firms have agreed to finalize a plan to jointly develop a latest electric vehicle by May 7, after which Foxconn is committed to investing a further $70 million. In response to Lordstown, this plan has not been finalized because Foxconn will not be making “commercially reasonable efforts” to finish it.
In an announcement to CNBC, Lordstown said Foxconn’s actions were “totally unwarranted” and had caused “significant – and what’s becoming irreparable – damage to the corporate.”
Lordstown warned in a filing that it could be forced to file for bankruptcy protection if the Foxconn deal fails. At the tip of 2022, the corporate still had $221.7 million, but lost over $100 million within the fourth quarter.
Foxconn didn’t immediately reply to a request for comment.