Home » US business news » Lordstown files for bankruptcy protection and sues Foxconn over $170 million funding dispute
Lordstown files for bankruptcy protection and sues Foxconn over $170 million funding dispute
https://www.whatjobs.com/news/usa/us-business-news/lordstown-files-bankruptcy-and-sues-foxconn-over-170-million-funding-dispute
By Nithya Bose in US business news, posted June 28, 2023
Troubled electric truck maker Lordstown Motors has filed for bankruptcy protection and sued Foxconn for allegedly backpedaling on an investment deal.
It accused Foxconn of fraud over failed $170 million investment deal in Lordstown and not collaborating on new electric vehicle projects.
In response to the legal action, Foxconn expressed its disappointment and stated its intention to suspend further discussions and potentially take legal action in return.
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The company hoped to find a resolution to satisfy all parties involved without litigation.
Trump has once hailed Lordstown for creating manufacturing jobs, but it faced setbacks, management changes, and sold few trucks.
The company acquired a factory from General Motors in 2019 and entered a deal to sell the Ohio factory to Foxconn for $230 million.
Subsequently, a second agreement was reached wherein Foxconn would invest up to $170 million in Lordstown, obtaining a 19.3% stake in the company.
While Foxconn made an initial payment of $52.7 million, the remaining $47.3 million payment was contingent upon regulatory approval, which was obtained in late April.
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However, Foxconn did not fulfill its payment obligation, claiming that Lordstown had breached the agreement by allowing its stock price to fall below $1 per share.
In response, Lordstown Motors executed a reverse stock split to raise its share price above the threshold.
Lordstown had warned investors of a bankruptcy filing if it can't reach an agreement with Foxconn or secure alternative funding sources.
The company also revealed its dwindling cash reserves and the possibility of halting production of its Endurance electric pickup without the support of a strategic partner.
As of the end of March, it had $108.1 million in available cash, having incurred a loss of $171.1 million in the first quarter of the year.
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