The Lordstown Motors Corp. Endurance electric pickup truck is shown during its unveiling event in Lordstown, Ohio on June 25, 2020.
Matthew Hatcher | Bloomberg | Getty Images
Troubled electric truck maker Lordstown Motor Company On Tuesday, it filed for Chapter 11 bankruptcy protection and said it would sell itself amid ongoing disputes over a pledged investment by Taiwanese manufacturer Foxconn.
The stock fell as much as 60% in early trading on the news, but pared some of those losses by closing Tuesday, down 17% from Monday’s close.
At the same time as the bankruptcy filing, Lordstown filed a lawsuit against Foxconn. The company accused Foxconn of fraud and failure to comply with an agreement that required the Taiwanese company to invest up to $170 million in Lordstown and required the two companies to collaborate on a range of new electric vehicles.
In a statement provided to CNBC, Foxconn said it wanted to continue discussions to reach a resolution that “satisfies all stakeholders” and not “result in baseless legal action.” But in light of the lawsuit and Lordstown’s attempt to “mislead the public”, the company is suspending negotiations and reserves the right to take legal action.
Lordstown, launched in 2019, factory acquired from General Motors With enthusiastic support from the Trump administration, a deal was reached last year to sell the Ohio plant to Foxconn for $230 million. After that deal closes in May 2022, Lordstown and Foxconn agreed to a second deal in which Foxconn will invest up to $170 million in Lordstown for a 19.3% stake in the startup.
Foxconn paid the initial $52.7 million under the deal last year. The next payment is $47.3 million and is due within 10 days of CFIUS regulatory approval. Lordstown said the approval was obtained in late April, but Foxconn never paid.
Instead, Foxconn told Lordstown that the startup violated the agreement by allowing its stock price to drop below $1 a share. Lordstown executed a 1:15 reverse stock split in May, pushing its shares back to the key $1 mark.
In early May, Lordstown warned investors that it could file for bankruptcy if it doesn’t strike a deal with Foxconn or secure additional funding elsewhere. Days later, Lordstown said it was running out of cash and would be forced to halt production of the Endurance electric pickup unless it found a strategic partner.
Lordstown had only $108.1 million in available cash at the end of March after posting a $171.1 million loss in the first quarter.