Foxconn threatened to pull out of its $170 million investment deal with Lordstown Motors, which could send the EV startup into bankruptcy after starting production of its Endurance all-electric pickup.
Lordstown Motors filed an 8-K with the SEC on May 1, telling investors it received a letter from Foxconn on April 21 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 [Lordstown] was no longer in compliance with the $1 minimum bid price requirement for continued listing on The Nasdaq Global Select Market.”
Foxconn said Lordstown has 30 days to cure the breach, or the agreement will be terminated.
Lordstown said it believes the Foxconn allegations are “without merit,” and the terms of the agreement would not permit Foxconn to terminate it at this time. Finally, if Foxconn were to terminate the agreement, 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, the automaker said, but “no assurances can be given that the parties will reach a resolution of these matters.”
Lordstown shares are down more than 30% 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 led the company to begin manufacturing the Endurance pickup.
Lordstown made it clear to investors before the Foxconn deal 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 warned 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 resolution with Foxconn cannot be found. Without that, it would then be forced to close its doors for good.
Abby Andrews