Lordstown Motors has sued its investment partner Foxconn and filed for Chapter 11 Bankruptcy, sending the stock in a downward spiral on Tuesday morning.
The move to sue Foxconn is likely the final step that will close out a partnership between the two companies that was initially established to begin Endurance pickup production and bring Lordstown to the market.
Lordstowns’ Chapter 11 filing will help the company reorganize its business affairs, debts, and assets. Chapter 11 allows a company to stay in business and restructure its obligations and is not necessarily a move toward closure.
The automaker filed both its Chapter 11 Bankruptcy and its litigation against Foxconn in Delaware.
Lordstown is accusing Foxconn of fraudulent conduct, as well as “broken promises,” according to Reuters, as it did not abide by an agreement that would see the Taiwan-based company invest up to $170 million to help launch production of its all-electric vehicles.
Lordstown seeks partner in Endurance production, expects it to end soon
Foxconn invested over $52 million and holds an 8.4 percent stake in Lordstown. It now believes Foxconn misled the company about the potential of working together on EV production.
It has been just the most recent chapter in what has been a brutal relationship for the two entities.
In May, Lordstown said it received a letter from Foxconn in late April accusing the automaker of breaching the investment contract the two had agreed upon as the automaker’s stock had dropped below the $1.00 minimum bid price requirement to be listed on Nasdaq.
Credit: Lordstown Motors
Lordstown and Foxconn claim both had an interest in working together to fix the relationship. Foxconn even said today that it intended to take “a positive attitude” toward fixing the relationship and moving forward. However, it will suspend negotiations with Lordstown and may countersue.
Great Hill Capital Chairman Thomas Hayes believes it is the end of the road for EV startups to be successful. “Moving forward, it will be Tesla and the tradition incumbents,” he said.
At the time of publication, Lordstown stock was down 25 percent, trading at $2.07.
Disclosure: Joey Klender does not own Lordstown stock.
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