Lordstown Motors Stock Dives After Deal Delayed
LORDSTOWN, Ohio – Shares of Lordstown Motors Corp. traded at their lowest level at one point on Monday as investors reacted to last week’s announcement that a deadline to reach an agreement between the company and Foxconn would be extended to May 14.
Lordstown Motors Corp., which trades under the ticker symbol RIDE, saw its stock value drop 4.5% Monday, closing at $2.08 per share. Just before 2 p.m., shares of RIDE traded at $1.96, a new low for the EV startup.
The company announced after the market closed on Friday that the deadline for a proposed asset purchase agreement and contract manufacturing agreement with Taiwan-based Foxconn would be extended to May 14.
The initial closing date had been set for Saturday, April 30.
In November, the parties announced that they had reached an agreement in principle for Foxconn to purchase Lordstown Motors’ 6.2 million square-foot manufacturing plant for $230 million and a $50 million equity investment.
Thus far, Foxconn has made its $50 million equity purchase and has paid installments of $100 million, $50 million and another $100 million toward the acquisition of the plant.
The remaining balance is due at closing.
On April 9, the parties received clearance for the transactions from the Committee on Foreign Investment in the United States.
Should the deal fail to close by May 14 without another extension, Lordstown Motors would be obligated to repay Foxconn its down payments, the company said. And Lordstown Motors does not have sufficient cash to do so, the company said.
Foxconn could then exercise its rights under the agreement and foreclose on Lordstown’s plant and assets, according to an earlier regulatory filing.
The entire deal is contingent upon the parties also arriving at a contract manufacturing and joint venture development agreement. This calls for a financing structure that would allow Foxconn to manufacture the Lordstown Motors Endurance EV pickup – scheduled for limited production in September.
The manufacturing agreement would also include future Lordstown Motors products built with Foxconn’s mobility-in-harmony, or MIH, platform.
According to financial documents filed with regulators earlier this year, Lordstown Motors said the company requires “a joint product development agreement and an appropriate funding structure that enables us to raise substantial additional capital necessary to bring the Endurance into production and to fund future vehicle development.”
No deal has been reached pursuant to a joint venture agreement, but discussions are ongoing, the company said.
Shares of Lordstown Motors are down more than 77% over a 52-week period. RIDE has lost 43.6% of its value over the last month and nearly 13% over the past five days.
Lordstown Motors expects to provide further updates regarding the status of the agreement as part of its earnings announcement and conference call on May 9, the company said.
In February, Lordstown Motors executives said the company needed to raise approximately $250 million in the near-term to finance production of the Endurance. Lordstown Motors plans to produce just 500 trucks this year and another 2,500 in 2023.
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