EV startup Lordstown Motors warned that it may file for bankruptcy after partner Foxconn Technology Group threatened to withhold funding.
In a securities filing on May 1 seen by Bloomberg, Lordstown Motors said it may be forced to cease operations if it can’t reach an agreement with the Taiwanese company or find alternate financing.
The two companies are in talks to find a resolution after Foxconn notified Lordstown that it could terminate its investment in the EV startup in as little as 30 days.
On April 21, Lordstown received a letter from the Taiwanese company about a breach in their agreement that would allow the latter to pull out of the investment agreement under which Foxconn is required to purchase 26.9 million shares of Class A common stock this month for approximately $47.3 million.
According to the filing, Foxconn‘s move was rushed by a Nasdaq warning last month to Lordstown that its stock may be delisted after falling below a minimum $1 per share level for 30 straight days.
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Lordstown warned that if the investment agreement with Foxconn falls, the company may go under.
“If we are unable to resolve our dispute with Foxconn in a timely manner on terms that allow us to continue operating as planned, identify other sources of funding, identify a strategic partner and resolve our significant contingent liabilities, we may need to curtail or cease operations and seek protection by filing a voluntary petition for relief under the Bankruptcy Code.”
Lordstown Motors’ 8-K form filed with the SEC
Only six months ago, Foxconn said it planned to invest as much as $170 million in the startup and take two board seats. The deal gave Lordstown much-needed capital while helping Foxconn to establish itself as an automobile manufacturer.
It’s worth noting that the Taiwanese company also paid $230 million to the startup to buy a former GM factory in Lordstown, Ohio, where it planned to build Lordstown’s debut vehicle – the Endurance electric pickup truck – under contract.
Now, the partnership seems to have become destabilized amid turmoil in the EV market. Only 31 Endurance trucks had been made for sale as of February 2023, and only six of those have been delivered so far. Lordstown stock plunged 27 percent to 38 cents in morning trading in New York.
