Lordstown Motors, an electric vehicle startup, has declared Chapter 11 bankruptcy and is seeking buyers amidst a legal battle with Foxconn over unfulfilled investment promises. The Taiwanese manufacturing giant was accused by Lordstown of fraud and failing to honor an investment agreement worth up to $170 million. This announcement caused Lordstown’s stock to plummet more than 60% in premarket trading.
Concurrent with its bankruptcy announcement, Lordstown has initiated legal action against Foxconn. The dispute center on Foxconn’s alleged failure to make a scheduled $47.3 million investment following regulatory approval, which was a part of their agreement to develop new electric vehicles together. Despite receiving the first instalment of $52.7 million, Foxconn withheld further payment, citing a breach of contract as Lordstown’s stock price dipped below $1 per share. Lordstown attempted to rectify this by executing a 1:15 reverse stock split in May, which temporarily elevated its share price above the $1 threshold.
The company’s financial distress was highlighted in early May, warning of possible bankruptcy if it could not reconcile with Foxconn or secure alternative funding. Lordstown reported a critical financial situation with just $108.1 million in cash at the end of March, following a $171.1 million loss in the first quarter. The company also indicated that without a strategic partnership, it would halt production of its Endurance electric pickup truck.
Lordstown Motors, founded in 2019 and acquiring a factory from General Motors with support from the Trump administration, had previously sold the Ohio factory to Foxconn for $230 million in a deal that concluded in May 2022. Under a subsequent agreement, Foxconn pledged to invest up to $170 million in Lordstown in exchange for a 19.3% stake in the company, a commitment now central to their legal and financial disputes. Foxconn has yet to respond to the allegations.
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