- In Lordstown’s filing Monday, Foxconn has threatened to pull out of a key financing deal.
- Foxconn argued that the contract was breached because Lordstown received a delisting notice from NASDAQ.
- If the deal doesn’t happen, Lordstown said, it will go bankrupt.
Sign outside Lordstown Motors Corporation headquarters in Lordstown, Ohio on Saturday, May 15, 2021.
Dustin France | Bloomberg | Good pictures
Shares of electric vehicle startup Lordstown Motors on Monday said a financing deal with Foxconn was in jeopardy — and that it could face bankruptcy if the deal doesn’t go through. Shares fell 25% in early trade.
Lordstown said on Monday Regulatory filings A letter from Foxconn on April 21 accused the startup of breaching an investment agreement because its stock had fallen below $1 per share for 30 consecutive trading days, prompting a delisting notice from Nasdaq.
The troubled startup agreed to sell its Ohio factory to a Taiwanese contract-manufacturing company last year. Following that deal, which expires in May 2022, the two companies agreed to a second deal in which Foxconn will invest up to $170 million in a 19.3% stake in Lordstown.
Foxconn paid the first $52.7 million due under that deal last year, but the rest — and the deal — is now in jeopardy.
According to the terms of the agreement, Foxconn must invest $47.3 million within 10 days of receiving regulatory approval from the Committee on Foreign Investment in the United States. That approval was received on April 25, Lordstown said, meaning Foxconn is obligated to make that investment by May 8.
Lordstown said he was concerned that further investments would not come before that deadline and that Foxconn did not appear to be making a good faith effort to complete the EV project, one of the deal’s milestones.
The two companies have agreed to complete the project to jointly develop a new EV by May 7, after which Foxconn is required to invest an additional $70 million. According to Lordstown, the project was not finalized because Foxconn did not make “commercially reasonable efforts” to complete it.
In a statement to CNBC, Lordstown said Foxconn’s actions were “wholly unnecessary” and “caused material — and irreparable — harm to the company.”
Lordstown warned in the filing that Foxconn could be forced to file for bankruptcy protection if the deal fails. The company still had $221.7 million at the end of 2022, but it lost more than $100 million in the fourth quarter.
Foxconn did not immediately respond to a request for comment.