Posted on June 27, 2023
Struggling electric-truck manufacturer, Lordstown Motors, has filed for Chapter 11 bankruptcy protection. The announcement was made on Tuesday as the company simultaneously filed a lawsuit against Taiwanese tech giant Foxconn.
Following the bankruptcy filing, Lordstown's shares fell dramatically in early trading - by as much as 60%. They did regain some ground, however, and by the close of trading on Tuesday, shares were down 17% from Monday's close.
In their lawsuit, Lordstown accused Foxconn of fraud and of failing to abide by an agreement that called for the Taiwan-based firm to invest up to $170 million in Lordstown. They were also expected to collaborate on the development of new electric vehicles.
In response, Foxconn expressed disappointment, stating it had hoped to resolve the situation through continued discussions without "resorting to baseless legal actions." The company has suspended talks due to the litigation and is considering legal action of its own.
Established in 2019, Lordstown Motors initially gained the support of the Trump administration and even acquired a factory from General Motors. They struck a deal last year to sell their Ohio factory to Foxconn for $230 million. Following this deal, a second agreement was made that Foxconn would invest an additional $170 million in Lordstown, thereby acquiring a 19.3% stake in the startup.
However, Lordstown claims Foxconn failed to make the second payment of $47.3 million after the regulatory approval from the Committee on Foreign Investment in the United States was secured in late April.
Facing dwindling funds, Lordstown warned investors in early May of a possible bankruptcy if no agreement with Foxconn was reached, or alternative funding sources were not found. By the end of March, Lordstown had just $108.1 million in cash, following a loss of $171.1 million in the first quarter. The company faces the cessation of production of its Endurance electric pickup without strategic partnership or additional funding.
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