2020 and In 2021, we have several months of enthusiasm for new electric automakers intertwined with the recovery of blank-check companies. These public shell companies, also known as special purpose acquisition companies (SPACs), promised quick access to capital and access to public markets, and many tech and tech-focused companies accepted their offer.
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In 2020 and 2021, several EV companies have taken the SPAC route to raise quick cash and go public, especially since investors are quite comfortable investing in such experimental deals. Investor presentations from these companies were enthusiastic, showing a clear path to production and substantial profits.
This is obvious in retrospect, but the results often prove to be messy.
American electric vehicle company Lordstown Motors is one such example. Now, the company is filing for bankruptcy protection while suing former partner Foxconn. As TechCrunch reported earlier today:
Lordstown Motors followed through on threats to sue Foxconn, the Taiwanese company best known for making Apple’s iPhone. The electric car company took legal action against Foxconn on Tuesday as it filed for bankruptcy and prepared to sell. (…)
In the complaint, Lordstown said Foxconn had misled the electric carmaker about its cooperation in car development plans and was “not the partner it had promised to be.” The indictment accuses Foxconn of pretending to support the Endurance pickup and future joint product development in order to secure ownership of Lordstown’s most valuable asset, the Ohio manufacturing facility, and poach some of Lordstown’s skilled manufacturing and operations employees.
It would be tempting to blame Lordstown’s failure on a dispute between the two companies. But that is wrong. In fact, the Lordstown saga is a nasty mixture of pure SPAC. Let us consider some relevant facts to form our opinion.
Lordstown’s SPAC Tour
TechCrunch’s coverage of Lordstown is informative and wide-ranging, so if you want the real details, start here. For others who are happy with the summary, allow me: