Lordstown Motors Corp (NASDAQ:RIDE) shares plummeted 43% to $1.58 in early Tuesday trading after the struggling electric-vehicle (EV) maker announced that it has filed for Chapter 11 bankruptcy protection and said it would put itself up for sale amid a legal dispute over investments that had been promised by Foxconn.
Lordstown accused Foxconn of fraud and of failing to abide by an agreement that called for the Taiwanese manufacturer to invest up to $170 million in Lordstown, and for the two companies to collaborate on a range of new electric vehicles.
Last year, Lordstown sold its Ohio factory, which was acquired from General Motors, to Foxconn for $230 million.
Following the deal, Lordstown and Foxconn agreed to a second agreement in which Foxconn would invest up to $170 million in Lordstown, taking a 19.3% equity interest in the startup.
CNBC reported that Foxconn paid the first $52.7 million due last year, but the next payment of $47.3 million, which was due within 10 days of regulatory approval by the Committee on Foreign Investment in the United States, was never made, according to Lordstown.
Foxconn alleges that Lordstown had breached the agreement by allowing its stock price to fall below $1 per share.
Lordstown, though, executed a 1:15 reverse stock split in May 2023, pushing its share price back above the $1 level.
During its first quarter of 2023, Lordstown saw its net loss widened to $171 million from $89 million a year earlier.
Contact Sean at sean@proactiveinvestors.com