Lordstown shares plunge 23% as investor Foxconn alleges breach of contract
May 1 (Reuters) – Shares in Lordstown Motors ( RIDE.O ) fell on Monday, closing 23% lower after major shareholder Foxconn alleged it breached its $170 million investment deal and the electric truck maker warned it could be forced to file for bankruptcy.
Lordstown warned in a US Securities and Exchange Commission filing that “there is substantial doubt about our ability to continue as a going concern.”[ads1]; Without a solution with Foxconn, other financing or new partners, it could be forced to file for bankruptcy or cease operations, it added.
Lordstown said it was in talks with the Taiwanese contract manufacturer to seek a solution.
It rejected Foxconn’s breach of contract claim, saying the claim was based on a takedown notice that Nasdaq had sent to the Ohio-based automaker. Lordstown said last month that the notice had no immediate impact on the IPO and that it had until Oct. 16 to regain compliance with Nasdaq rules.
“Foxconn’s actions are completely unjustified. Their conduct has resulted in substantial — and what will be irreparable — harm to the company,” Lordstown said in a statement.
“In the absence of a timely resolution, we will take all necessary measures to protect our business interests and enforce all of our rights and remedies.”
Foxconn did not immediately respond to a request for comment.
Lordstown shares, which at one point fell more than 50% on Monday, closed at 40 cents, down 12 cents in heavy trading. They were down 8% in the aftermarket.
Foxconn struck a deal in November to take a nearly 20% stake in the money-losing US electric truck maker for up to $170 million.
In May 2022, Lordstown completed a deal to sell the Ohio factory for $230 million to Foxconn, excluding assets such as the hub motor and battery packs.
Lordstown said Foxconn declined to buy $47.3 million in stock, which was supposed to happen soon after the Committee on Foreign Investment in the United States concluded on April 25 that there were no outstanding national security concerns about the deal.
Lordstown Motors bought a former General Motors Co small car assembly and equipment plant for $20 million in Ohio after the Detroit automaker closed it in March 2019.
Reporting by Tiyashi Datta in Bengaluru; Editing by Anil D’Silva
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