Signage exterior Lordstown Motors Corp. headquarters in Lordstown, Ohio, on Saturday, Could 15, 2021.
Dustin Franz | Bloomberg | Getty Photos
Shares of electrical car startup Lordstown Motors disclosed on Monday {that a} funding cope with Foxconn is in jeopardy – and that it might go bankrupt if the deal does not occur. Shares sank 25% in early buying and selling.
Lordstown mentioned in a Monday regulatory submitting that it acquired a letter from Foxconn on April 21 alleging that the startup was in breach of an funding deal as a result of its inventory had fallen beneath $1 per share for 30 consecutive buying and selling days, triggering a delisting discover from NASDAQ.
The embattled startup struck a deal to promote its Ohio manufacturing unit to the Taiwanese contract-manufacturing large final 12 months. Following that deal, which closed in Could 2022, the 2 corporations agreed to a second deal through which Foxconn would make investments as much as $170 million in Lordstown, amounting to a 19.3% stake.
Foxconn paid the primary $52.7 million due beneath that deal final 12 months, however the the rest – and the deal itself – is now in jeopardy.
Underneath the phrases of the deal, Foxconn is meant to take a position $47.3 million inside 10 days of regulatory approval by the Committee on Overseas Funding in america. That approval was secured on April 25, Lordstown mentioned, which means that Foxconn is obliged to make that funding by Could 8.
Lordstown mentioned it is involved that additional funding will not are available in earlier than that deadline, and that Foxconn does not appear to be making religion effort to finish an EV plan that is likely one of the deal’s milestones.
The 2 corporations had agreed to finalize a plan to collectively develop a brand new EV by Could 7, after which Foxconn is obliged to take a position an extra $70 million. Based on Lordstown, that plan hasn’t been finalized as a result of Foxconn is not making “commercially affordable efforts” to complete it.
In an announcement to CNBC, Lordstown mentioned that Foxconn’s actions are “utterly unwarranted” and have resulted in “materials — and what’s changing into irreparable — hurt to the corporate.”
Lordstown warned within the submitting that it might be pressured to file for chapter safety if the Foxconn deal falls by means of. The corporate nonetheless had $221.7 million readily available as of the top of 2022, nevertheless it misplaced over $100 million within the fourth quarter.
Foxconn did not instantly reply to a request for remark.