Lordstown Motors Stock Plunges in Wake of Foxconn Dispute
LORDSTOWN, Ohio – Shares of electric-vehicle manufacturer Lordstown Motors Corp. fell sharply Monday after the company reported it would consider bankruptcy should Foxconn pull out of a critical investment agreement the parties signed in November.
Lordstown Motors stock, which trades under the ticker RIDE, closed 23.2% lower at 40 cents per share Monday after a volatile day of trading.
The stock hit its all time low of 25 cents per unit during early afternoon action but rallied later in the day and closed higher. Shares were trending lower in after-hours trading.
On Monday, Lordstown Motors reported in a filing with the U.S. Securities Exchange Commission that Foxconn informed the company on April 21 that it was in breach of a $170 million investment agreement because of a delisting notice Lordstown Motors received from Nasdaq.
Under Nasdaq policy, Lordstown Motors would have 180 days to comply. Lordstown Motors was contemplating a reverse stock split to boost the price of a single share.
Foxconn said it would terminate the deal unless the EV startup attained compliance with Nasdaq rules within 30 days, according to the filing.
Lordstown received the delisting notice April 20 because its stock had not met Nasdaq’s minimum bid requirement of $1 for at least 30 consecutive business days.
Shares of RIDE fell sharply after the filing, as the struggling EV company hit back.
“Foxconn’s actions are completely unwarranted,” Lordstown Motors said in a statement. “Their course of conduct has resulted in material – and what is becoming irreparable – harm to the company. We intend to continue our efforts to minimize the damage and work with Foxconn to find an amicable path forward. However, in the absence of a timely resolution, we will take all actions necessary to protect our business interests and enforce all of our rights and remedies.”
That remedy could include bankruptcy if the matter is not resolved, the company said.
Lordstown Motors said it would be “deprived of critical funding necessary for its operations.” The company also said that should a resolution not be reached, it could “curtail or cease operations and seek protection by filing a voluntary petition for relief under the bankruptcy code.”
Lordstown Motors also said that Foxconn has no authority to cancel the deal, since it has already closed on approximately $57 million in stock purchased per the agreement.
Moreover, Lordstown Motors said Foxconn is in breach of the agreement, alleging the company is not acting in good faith in its efforts to proceed with another $47.3 million of its promised stock purchase.
Lordstown Motors said in its filing that it’s evaluating its legal and financial alternatives in the event a resolution is not reached.
“Foxconn has notified Lordstown Motors that it accepts Lordstown’s position that Foxconn does not have a current right to terminate the Investment Agreement if the breach previously notified by Foxconn is not cured within 30 days,” Foxconn Technology Group said in a statement. “However, Lordstown Motors is in breach of the Investment Agreement as a result of the previously disclosed notice from the Nasdaq Stock Market LLC indicating that Lordstown Motors was no longer in compliance with the $1.00 bid price requirement for continued listing on The Nasdaq Global Select Market.”
Foxconn continued: “We understand that Lordstown Motors is currently evaluating various courses of action as it pertains to their listing status with NASDAQ. In the meantime, we remain open to continuing our discussion and working together to reach a mutually acceptable outcome that benefits our respective stakeholders. Foxconn vigorously disputes any claim by Lordstown Motors that Foxconn is in breach of the investment agreement. Foxconn has and will continue to fulfill its obligations and duties under the Investment Agreement in all material respects.”
The investment agreement is intended to fund Lordstown Motors’ future electric-vehicle programs with Foxconn, using the Taiwanese tech company’s Mobility-In-Harmony platform.
Foxconn purchased Lordstown Motors’ plant – a former General Motors factory – for $230 million in May 2022. The Taiwanese tech giant also signed a contract manufacturing agreement to produce Lordstown Motors’ first vehicle – the all-electric Endurance pickup. Production of the Endurance began in the third quarter of 2022 but has proceeded at a slow pace.
Lordstown Motors halted production of the vehicle in January because of quality concerns and issued two voluntary recalls. The Endurance resumed production in mid-April.
Shares of Lordstown Motors have fallen 37.3% over the past month and 16% over the past five days.
In the last year, RIDE stock has lost more than 80% of its value.
Copyright 2024 The Business Journal, Youngstown, Ohio.
