Lordstown Motors Corp.’s Endurance electric pickup truck is displayed during a grand opening event in Lordstown, Ohio on June 25, 2020.
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Electric truck maker in trouble lordstown motors It filed for Chapter 11 bankruptcy protection on Tuesday and said it would be put up for sale amid an ongoing dispute over promised investments by Taiwanese manufacturer Foxconn.
Shares fell more than 60% in premarket trading after the news.
Simultaneously with its bankruptcy filing, Lordstown filed a lawsuit against Foxconn. The company accused Foxconn of fraud and of failing to comply with an agreement that required the Taiwan-based firm to invest up to $170 million in Lordstown and for the two to work together on a range of new electric vehicles.
In a statement provided to CNBC, Foxconn said it hoped to continue discussions to reach a solution that “satisfied all stakeholders” without “recourse to baseless legal action.” But in light of the litigation and what he characterized as Lordstown’s attempts to “mislead the public”, he suspended talks, reserving the right to pursue legal action of his own.
Lordstown, launched in 2019 with a factory acquired from general motors and enthusiastic support from the Trump administration, reached an agreement to sell that Ohio factory to Foxconn for $230 million last year. Following the deal, which closed in May 2022, Lordstown and Foxconn agreed to a second deal in which Foxconn would invest up to $170 million in Lordstown, acquiring a 19.3% stake in the startup.
Foxconn paid the first $52.7 million owed under that agreement last year. The next payment, of $47.3 million, was due within 10 days of regulatory approval by the United States Committee on Foreign Investment. That approval was obtained in late April, Lordstown said, but Foxconn never made the payment.
Instead, Foxconn told Lordstown that the startup had reneged on the deal by allowing its share price to fall below $1 a share. (Lordstown executed a 1:15 reverse stock split in May, pushing its share price above the critical $1 mark.)
In early May, Lordstown warned investors that it was likely to file for bankruptcy if it did not reach a deal with Foxconn or acquire additional funds elsewhere. A few days later, Lordstown said he was almost out of cash and would be forced to halt production of his Endurance electric pickup truck unless he could find a strategic partner.
Lordstown had just $108.1 million in cash on hand at the end of March after losing $171.1 million in the first quarter.