Lordstown Motors, Foxconn at an ‘Impasse’ Regarding Investment
LORDSTOWN, Ohio – Electric-vehicle manufacturer Lordstown Motors Corp. said in a regulatory filing this morning that the company and major investor Foxconn are at an “impasse” regarding future investments in the EV startup, and that Foxconn does not intend to close on a critical funding package next week.
Under the terms of a $170 million investment agreement signed in November, Foxconn is supposed to close on a second round of stock purchases worth $47.3 million on May 8. In November, Foxconn closed on approximately $57 million in equity purchases.
“However, to date, the parties are at an impasse, and Foxconn has indicated it does not intend to close on the subsequent common closing on May 8,” the filing said.
The investment is crucial to Lordstown Motors’ operations, the company said. Should the closing be delayed or not occur, Lordstown would be “deprived of critical funding necessary for its operations” and has considered bankruptcy as an option.
The company also warned that should it not secure a partner to help produce its flagship product, the all-electric Endurance, that production of the vehicle would cease “in the near future.”
Lordstown Motors said that it is in discussions with Foxconn to seek a resolution in the matter.
Earlier this week, Lordstown Motors said that Foxconn informed the company that it was in breach of the investment agreement as a result of a delisting notice Lordstown received from Nasdaq. Nasdaq issued the notice because Lordstown Motors’ stock failed to maintain the minimum bid price of $1 for 30 consecutive business days.
Lordstown Motors has said Foxconn’s allegations are “without merit.”
Under Nasdaq rules, Lordstown Motors has 180 days to raise its stock price, which would be accomplished by a reverse stock split.
Initially, Lordstown Motors reported Foxconn indicated it could terminate the investment agreement because of the alleged breach, the filing noted.
Foxconn has since acknowledged it is unable to cancel the agreement but did say it was under no obligation to close the second round of funding unless the breach is cured. Foxconn has given Lordstown Motors 30 days to regain compliance with Nasdaq.
Furthermore, Lorstown Motors said that Foxconn is unlikely to give its approval to the EV program budget and EV program milestones by May 7, according to the regulatory filing.
Also, Lordstown Motors said in its filing that Foxconn has failed to live up to its commitments regarding a contract manufacturing agreement the parties signed in May 2022.
Foxconn builds the Lordstown Motors Endurance all-electric pickup at Foxconn’s plant in Lordstown.
Lordstown Motors said the manufacturing agreement requires Foxconn to use “commercially reasonable” efforts to reduce components and logistics costs, but these costs haven’t decreased.
The company added that it is seeking other partners, including automakers, to invest in the struggling EV manufacturer.
Should Lordstown Motors fall short of securing a partner, the company said it would cease production of the Endurance “in the near future.”
The EV startup on Thursday reported a net loss of $171.1 million and $108 million in cash and cash equivalents for the quarter ended March 31.
Investors shrugged off the news Thursday, as Lordstown Motors shares traded slightly higher at midday at 40 cents. Lordstown Motors stock, which is listed under the ticker RIDE, plunged to 25 cents per share on Monday before rebounding.
Pictured at top: File photo of production of an Endurance truck at Foxconn’s plant in Lordstown.
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