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Lordstown Motors’ Endurance Corp. electric pickup truck is shown during the unveiling event in Lordstown, Ohio, June 25, 2020.
Matthew Hatcher | bloomberg | Getty Images
Struggling electric truck maker Lordstown Motors It filed for Chapter 11 bankruptcy protection on Tuesday and said it would put itself up for sale amid an ongoing dispute over investments promised to Taiwanese manufacturer Foxconn.
Shares fell as much as 60% in early trading following the news, but regained some of their gains to end Tuesday’s session down 17% from Monday’s close.
Concurrent with its bankruptcy filing, Lordstown filed suit against Foxconn. The company has accused Foxconn of fraud and of failing to live up to the agreement, which called for the Taiwan-based company to invest up to $170 million in Lordstown, and work together on a suite of new electric cars.
In a statement provided to CNBC, Foxconn said it hopes to continue discussions to reach a solution that “satisfies all stakeholders” without “resorting to unfounded legal action.” But amid litigation and what it described as Lordstown’s attempts to “mislead the public”, it is putting talks on hold and reserving the right to take its own legal action.
Lordstown launched in 2019 with a factory acquired from general motors Enthusiastic support from the Trump administration also sealed the deal to sell that Ohio plant 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, with a 19.3% stake in the startup.
Foxconn paid the first $52.7 million owed under that deal last year. The next payment, in the amount of $47.3 million, was due within 10 days of regulatory approval by the Committee on Foreign Investment in the United States. That approval was obtained in late April — but Foxconn never made the payment, Lordstown said.
Instead, Foxconn told Lordstown that the startup had breached the deal by allowing its share price to fall below $1 per share. Lordstown executed a reverse stock split of 1:15 in May, pushing its share price back above the critical $1 mark.
In early May, Lordstown warned investors that it could file for bankruptcy if it did not reach an agreement with Foxconn or secure additional funding elsewhere. A few days later, Lordstown said it was running out of cash and would have to stop production of its Endurance electric pickup unless it could find a strategic partner.
Lordstown had just $108.1m in cash available at the end of March, after losing $171.1m in the first quarter.
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