Electric vehicle producer Lordstown Motors Corp (NASDAQ:RIDE) may file for bankruptcy and shut down operations after Foxconn Technology told the startup it may abandon a production partnership
The Taiwanese manufacturing company has threatened to withhold funding, according to a security filing Monday, which could drive Ohio-based Lordstown into insolvency. As a result, the company is seeking alternative financing.
“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 said.
Lordstown stock sank more than 30% Monday morning to $0.36.
This potential unraveling comes six months after Foxconn agreed to invest p to $170 million in Lordstown and take two seats on the company’s board. Foxconn also paid $230 million for a former General Motors factory in Lordstown, Ohio, where it planned to make Lordstown’s debut vehicle under contract.
In January, Lordstown asked Foxconn to suspend production due to rising costs for its electric Endurance pickup — which were higher than its target sales price of $65,000.
Lordstown said it would need another partner, and now the companies are looking for a resolution after Foxconn said it could terminate its investment in as few as 30 days thanks to a breach in their agreement.
That stemmed from a Nasdaq warning that Lordstown could be delisted if its share price fell below the exchange’s $1 minimum for 30 consecutive days.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
Follow him on Twitter @andrew_kessel