General Motors is no longer investing in Lordstown Motors as the Ohio-based electric vehicle startup continues to struggle to keep its doors open.
GM confirmed on Tuesday that it sold its stake in Lordstown during Q4 2021 following “an undisclosed lock-up period,” spokesperson Jim Cain said to CNBC.
GM owned 7.5 million shares of common stock during Lordstown’s SPAC deal that took the company public in late 2020. GM’s stake was worth approximately $75 million in initial equity value. The shares were given to GM in exchange for $25 million cash and in-kind contributions. The shares equated to less than a 5 percent ownership stake for GM in Lordstown.
Lordstown has struggled considerably since last year, delaying the launch of its introductory pickup truck and disclosing to investors that it was short on cash. Last year, it told shareholders there was “substantial doubt” the company would be open in June 2022. Foxconn, a Tawainese-based manufacturer of electronics, purchased Lordstown’s factory in Ohio, securing a joint venture between the two companies that would ultimately foresee the production of the Endurance all-electric pickup. The partnership is still being completely finalized, although the plant is already in Foxconn’s possession. CEO Dan Ninivaggi said the partnership was instrumental to Lordstown’s future endeavors.
The uncertainty was enough for GM to get out. Cain declined to disclose the exact timing of GM’s sale of Lordstown shares, nor could he commit on the net proceeds or market value of the shares because the total was not a material figure. GM’s investment was looked at as a “goodwill gesture,” as Lordstown was struggling to keep cash flowing in from investors. GM and LG built a $2.3 billion joint venture battery cell plant in Lordstown, but it was unknown whether the plant would supply cells for the Endurance pickup.
It appears the plan was always for GM to let go of its investment in Lordstown. “Our objective in investing was to allow them to complete the purchase of the plant and restart production,” Cain said.
Yesterday during Lordstown’s Q4 2021 Earnings Call, company executives confirmed there were several pre-production vehicles already manufactured. These cars are being used for a variety of validation activities to achieve full homologation, President Edward Hightower said. “Despite ongoing challenges securing parts and other supply chain issues, we continue to target commercial production and sales in the third quarter of 2022.”Lordstown stock (NASDAQ: RIDE) received several downgrades and reduced-price targets today, likely caused by the stock sale by GM. Lordstown stock was up over 3.5 percent at the time of writing, trading at $2.66 per share.
Disclosure: Joey Klender is not a Lordstown shareholder.
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