Signs are seen outside the Lordstown Motor Company headquarters in Lordstown, Ohio, Saturday, May 15, 2021.
Dustin Franz | Bloomberg | Getty Images
EV Startup Stakes Lordstown Motor Company Shares fell sharply after the company disclosed on Monday that a financing deal with Foxconn was in jeopardy – and that it could go bankrupt if the deal doesn’t go through. Shares were down more than 40% in afternoon trading.
Lordstown said on Monday Regulatory filing It received a letter from Foxconn on April 21 saying the startup violated an investment agreement after its stock fell below $1 a share for 30 consecutive sessions, triggering Nasdaq’s delisting notify.
The struggling startup reached a deal last year to sell its Ohio factory to the Taiwanese contract manufacturing giant. After that deal closes in May 2022, the companies agreed to a second deal in which Foxconn would invest up to $170 million, or a 19.3 percent stake, in Lordstown.
Foxconn paid the first $52.7 million due under the deal last year, but the rest — and the deal itself — are now at risk.
Under the terms of the deal, Foxconn was supposed to invest $47.3 million within 10 days of CFIUS approval. Lordstown said the approval was received on April 25, meaning Foxconn had until May 8 to make the investment.
Lordstown said it was concerned that no further investment would be made by that deadline, and that Foxconn did not appear to be working in good faith to complete its electric vehicle plans, one of the deal’s milestones.
The two companies have agreed to finalize plans to jointly develop new electric vehicles by May 7, after which Foxconn is obliged to invest an additional $70 million. According to Lordstown, the plan has not been finalized because Foxconn has not made “commercially reasonable efforts” to complete it.
In a statement to CNBC, Lordstown said Foxconn’s actions were “completely unfounded” and resulted in “material — and becoming irreparable — harm to the company.”
Lordstown warned in the filing that it could be forced to file for Chapter 11 bankruptcy if the deal with Foxconn falls through. The company still has $221.7 million on hand at the end of 2022, but posted a loss of more than $100 million in the fourth quarter.
Foxconn did not immediately respond to a request for comment.