Lordstown Motors’ financial life raft, Foxconn, is losing air as it threatened the automaker that it could pull out of its $170 million investment deal, which could send the company sinking into bankruptcy after starting production of its Endurance all-electric pickup.
Lordstown Motors filed an 8-K with the SEC today, telling investors that it received a letter from Foxconn on April 21, 2023, that accused the automaker of breaching its Investment Agreement “due to its previously disclosed receipt of a notice from the Nasdaq Stock Market LLC indicating that the Company was no longer in compliance with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Global Select Market.”
Foxconn said Lordstown has 30 days to cure the breach, or its Investment Agreement would be terminated.
Lordstown said it believes the Foxconn allegations are “without merit,” and the terms of the Investment Agreement would not permit Foxconn to terminate the agreement at this time. Finally, if Foxconn were to terminate the Agreement between the two companies, it would have “breached the Investment Agreement by failing to use necessary efforts to agree upon the EV program budget and EV program milestones to facilitate the funding of the additional Preferred Stock investment.”
Foxconn and Lordstown are currently in discussions to seek a resolution regarding the matters, the automaker said, but “no assurances can be given that the parties will reach a resolution of these matters.”
Lordstown shares are down over 30 percent at the time of writing, trading at $0.36 per share.
“Foxconn’s actions are completely unwarranted. Their course of conduct has resulted in material — and what is becoming irreparable — harm to the company,” Lordstown said in a statement.
The potential fallout between the two companies spells major implications for Lordstown. Foxconn came along in late 2021 and saved the automaker from financial ruin with its pledge to buy its Ohio production facility, which then triggered the company to begin manufacturing the Endurance pickup.
Lordstown was clear to investors before the Foxconn deal that there was “substantial doubt” the company could keep its doors open, and in June 2021, it stated it would likely close its doors within the next year. The deal with Foxconn saved the company in every way.
The deal falling through now would likely mean the end of Lordstown, as it wanted that there was once again “substantial doubt regarding our ability to continue as a going concern.” It would be forced to rely on other financial partners if a deal with Foxconn cannot be found. Without that, it would then be forced to close its doors for good.
Disclosure: Joey Klender is not a Lordstown or Foxconn investor.