Lordstown Motors Stock Tumbles as Deadline for Foxconn Deal Extended
LORDSTOWN, Ohio – Shares of Lordstown Motors Corp. tumbled to their lowest level to date on Monday, shortly after executives announced that the deadline to reach a deal with tech giant Foxconn had been extended once again.
Initially, the closing was set for April 30, but on April 29 that date was pushed to May 14. The new target to complete the deal is May 18 – the day before Lordstown’s annual shareholder’s meeting.
Lordstown Motors’ stock plunged to $1.55 per share on Monday, but had regained some ground to $1.72 by 11:30 a.m., down approximately 10%. The company’s stock trades on NASDAQ under the ticker RIDE.
Lordstown Motors and Foxconn are in discussions to finalize an asset purchase and a contract manufacturing agreement. The separate – but contingent – agreements call for Foxconn to acquire Lordstown’s plant and manufacture the company’s first electric vehicle, the Endurance pickup. The deal is also contingent on a joint product development agreement for future vehicles.
The new deadline allows the parties “a little more time to conclude our transaction,” Lordstown Motors CEO Daniel Ninivaggi Lordstown told analysts during an earnings call Monday.
The company announced in November that it had signed an agreement with Foxconn that calls for Foxconn to purchase Lordstown’s plant for $230 million. However, the deal is contingent on the parties entering into contract manufacturing and joint venture agreements, which have not been finalized.
The agreements are make-or-break for Lordstown Motors, as the company needs to sell its plant and secure the manufacturing and joint venture deals so it can remain in business.
Should Lordstown and Foxconn fail to reach an agreement by next Wednesday, Lordstown would be obligated to repay $200 million in down payments that Foxconn has already provided to Lordstown toward the purchase of the plant.
“If the loan comes due or the down payments come due because we haven’t closed the deal, we wouldn’t have the cash to fund it,” Ninivaggi said. “So, we do have to close the deal.”
Should the deal fall through, Foxconn could potentially foreclose on Lordstown Motors’ assets, according to documents filed with the U.S. Securities and Exchange Commission.
Ninivaggi described the discussions with Foxconn as “constructive,” noting the contract manufacturing and joint development agreements are complex and have taken more time to complete than anticipated.
“It’s a complicated deal,” he said. “It’s taken a little bit longer than we expected. I think that we’re in good constructive dialogue and the fact that Foxconn has agreed to extend the repayment deadline is a good sign.”
Lordstown Motors wants a contract manufacturing agreement with Foxconn so the Taiwain-based tech company can produce the Endurance, the all-electric light pickup truck now in pre-production stages at the plant.
Lordstown also seeks a joint product development partnership in which both companies could develop future products on Foxconn’s mobility-in-harmony, or MIH, platform, Ninivaggi said.
This platform opens up new potential for the Lordstown plant, a 6.2 million square-foot assembly complex once owned by General Motors.
“Foxconn has an excellent opportunity to fill the plant,” Ninivaggi said. In addition to Lordstown Motors vehicles, Foxconn would be able to produce EVs developed by smaller auto companies off of its MIH platform.
Last week, Fisker Inc. CEO Henrik Fisker reported during a conference call with analysts that the company is on track to produce its Fisker Pear EV at the Lordstown plant in 2024.
Fisker signed a contract manufacturing agreement last year whereby Foxconn would produce the Pear at Lordstown.
A partnership with Foxconn would also reduce costs for raw materials and components over time, Ninivaggi said.
“As the largest contract manufacturer in the world, Foxconn has significantly better purchasing power than we would on our own,” the CEO added. Foxconn also has a global supply-chain network and logistics capabilities that would help Lordstown reduce costs further.
Ninivaggi said it was also important to secure a more long-term joint development agreement with Foxconn that extends beyond production of the Endurance.
However, Lordstown Motors cautioned in a regulatory filing Monday that merely securing the agreements would not be enough to finance the limited launch the Endurance, scheduled for September of this year.
“Even if the Foxconn transactions are consummated in accordance with the current terms and on the anticipated timeline, we will need additional funding to execute our 2022 business plan and achieve scaled production of the Endurance, due to the capital required to complete testing and validation, purchase the raw materials and vehicle components for saleable vehicles, invest in the hard tooling to lower our bill of materials cost and fund future engineering and corporate expenditures,” the filing said.
Earlier this year, Lordstown Motors reported it would need to raise approximately $250 million in additional capital to fund the Endurance launch. Lordstown Chief Financial Officer Adam Kroll stated on the earnings conference that the company would need at least $150 million in new investment.
Meanwhile, Ninivaggi told analysts that the company in the short-term plans to hold off on major tooling investments in order to manage its balance sheet in preparation for the launch.
Lordstown expects to produce 500 Endurance EV trucks for commercial sale beginning in September 2022, but some of those deliveries will extend into early 2023, he said.
The company had said earlier that it expects to manufacture 2,500 units in 2023.
“Over the next 12 months, we’ll be focused on selling vehicles to a relatively small number of strategic fleet partners who offer the best opportunities for long-term relationships,” he said.
Lordstown Motors President Edward Hightower told analysts on the call that supply-chain disruptions during the first quarter – especially short supplies of steel, aluminum and semiconductors – led to delays manufacturing pre-production units.
Still, Hightower said that Lordstown Motors has manufactured a sufficient amount of trucks to begin engineering and validation testing.
“We cannot wait to get the Endurance into the hands of our customers,” he said.
Despite delays regarding a deal with Foxconn and supply-chain challenges, Ninivaggi said he remains optimistic.
“While definitive agreements have not been reached, and may not be reached, I believe we’re close and our relationship with Foxconn remains very solid,” Ninavaggi said. “We’re very close to achieving very important milestones.”
Before the conference call, Lordstown Motors reported that it had an ending cash balance of $203.5 million and posted a net loss of $89.6 million for the three months ended March 31.
“Our team members are incredibly committed and continue to work tirelessly to execute on our priorities,” Kroll said. “We are managing through a tough macroeconomic environment, and we are focused on managing our liquidity as we bring the Endurance to launch. At the same time, we understand that raising additional capital is critical to our ability to achieve our business plan in 2022 and beyond
Copyright 2022 The Business Journal, Youngstown, Ohio.