Lordstown Motors Shareholders Approve Reverse Stock Split

LORDSTOWN, Ohio – Electric-vehicle manufacturer Lordstown Motors Corp. announced Tuesday its shareholders have approved a reverse stock split that helps bring the company back into compliance with Nasdaq rules and hopefully resolves a dispute with its major investor, Foxconn.

Foxconn has refrained from closing on a second round of a $170 million investment deal the parties signed in November, alleging Lordstown Motors had violated the agreement because of plummeting stock value.

On Monday, shareholders at Lordstown Motors’ 2023 annual meeting approved measures allowing the company’s board of directors to effect a 1:15 reverse stock split. The split is intended to increase market share value by combining 15 shares of Class A common stock into a single unit, thus multiplying the value of a single share by 15. 

The measure takes effect at 12:01 a.m. Wednesday.

On April 20, Lordstown Motors announced it received a delisting notice from Nasdaq, stating the company was in violation of exchange rules because its stock value had fallen below the $1 minimum bid price for at least 30 consecutive business days. Nasdaq allows companies 180 days to regain compliance before potentially delisting them from the exchange.

Foxconn informed Lordstown Motors on April 21 that the company was in violation of the $170 million investment agreement, citing the Nasdaq notice. According to Lordstown Motors, Foxconn gave the company 30 days to regain compliance. 

Lordstown Motors disputes Foxconn’s position.

Once the reverse stock split takes effect, Lordstown Motors must maintain a share price of $1 or more over 10 consecutive trading days to cure its default with Nasdaq, the company said in a release Tuesday morning.

It is unclear, however, whether the move will resolve the impasse with Foxconn, the Taiwanese manufacturer that builds Lordstown Motors’ signature EV pickup, the Endurance, at Foxconn’s plant here.

Foxconn purchased Lordstown Motors’ plant in May 2022 for $230 million and entered into a contract manufacturing agreement to build the Endurance. Foxconn also entered into an investment agreement with Lordstown Motors worth $170 million in November, and at that time completed a first round of stock purchases for approximately $57 million.

However, Foxconn has failed to close on a second round of equity purchases worth $47.3 million, which was due May 8, Lordstown Motors said. 

Although Lordstown Motors said the stock split “may satisfy Foxconn’s incorrect interpretation of the closing condition and cause Foxconn to close the transaction,” the company gave no assurances that a deal would be reached.

“No agreement currently exists, and the company cannot predict whether such an agreement will be reached in the future,” Lordstown Motors said.

Shares of Lordstown Motors, which trades under the ticker RIDE, were down 8% in morning trading to 28 cents per share.

In a corresponding regulatory filing, Lordstown Motors reiterated that should it not secure enough funding in the near term, the company would consider filing for bankruptcy protection.

Lordstown Motors reports that it has completed 56 Endurance pickups and has delivered 18 to customers since the start of commercial production in September 2022.

Twelve of these vehicles were delivered to customers after production resumed in late April, Lordstown Motors said.

Production of the Endurance was halted in January just before the company issued the first of three voluntary recalls of the electric pickup. On Sunday evening, one of the Endurance test vehicles caught fire while in storage at the plant.

“The Endurance continues to improve with each software update, and our team is encouraged by the most recent customer feedback,” Lordstown Motors said. “In light of the Foxconn dispute and the uncertainty regarding whether or to what extent Foxconn will fulfill its funding obligations under the investment agreement, the company has taken aggressive actions to reduce costs and preserve liquidity.”

As of April 30, 2023, the company had cash, cash equivalents and short-term investments of approximately $165 million, a decrease of approximately $11 million from the quarter ended March 31, 2023, Lordstown Motors said.

Copyright 2024 The Business Journal, Youngstown, Ohio.