Lordstown Motors is in danger of failing – again.
An EV company that went public through a SPAC merger warned investors Monday that it may have to file for bankruptcy because Foxconn could pull out of a significant financing deal, according to a regulatory filing.
Taiwanese manufacturer Foxconn sent a letter April 21 to Lordstown saying the automaker had breached the investment agreement because its share price had fallen below $1 for 30 days and was at risk of being delisted on the Nasdaq. Foxconn has warned that it will terminate the investment agreement if the breach is not resolved within 30 days.
While Lordstown disagreed with Foxconn’s assertion and said it intended to enforce its rights, the company also warned that withholding key financing would be detrimental to the company.
If the investment doesn’t happen, Lordstown won’t have the financing it needs to continue operating, according to an SEC filing. Lordstown said it was evaluating legal and financial alternatives should a solution not be reached.
“As a result of these uncertainties, there is significant doubt as to our ability to continue as a going concern,” Lordstown wrote in the regulatory filing. Our ability to obtain additional funding is very limited under current market conditions, particularly for our industry, and is also affected by other factors including the large amount of capital required, the Foxconn dispute, the fact that the BOM (Bill of Materials Cost) is currently unsustainable, and expected to continue to be, well above our selling price, the uncertainty surrounding the performance of any vehicle we produce, meaningful exposure to material losses and costs related to ongoing litigation and investigation by the SEC, notice to NASDAQ, the market price of our inventory and potential dilution from additional securities issuance.”
The company added that it will file for bankruptcy if it is unable to resolve the dispute with Foxconn or identify other sources of financing.
Last November, Foxconn agreed to increase its investment in Lordstown Motors by purchasing $170 million of newly created common and preferred shares. The additional investment came a year after Lordstown sold its 6.2 million square foot factory to Foxconn. As part of that $230 million deal, which included a $50 million direct investment, Foxconn agreed to help Lordstown Motors manufacture the Endurance pickup truck.
November deal, specifically the $100 million direct preferred equity investment, replaced the joint venture financing Foxconn and Lordstown Motors announced last year. The investment was to be made in tranches and subject to review by the Committee on Foreign Investment in the United States.