Embattled electric vehicle startup Lordstown Motors says it could run out of money if its deal with iPhone manufacturer Foxconn fails to go through. The deal is in jeopardy after Foxconn notified Lordstown that it’s in breach of its investment deal because its stock has fallen under $1 a share.
Lordstown traces its origins to GM’s announcement in 2018 that it would be closing down its Lordstown, Ohio, factory. Then-President Donald Trump assailed GM over the decision, leading to the automaker’s decision to sell the plant to a struggling electric truck startup called Workhorse.
Instead, Workhorse’s founder and former CEO, Steve Burns, started a new company called Lordstown Motors with the plan to build electric pickup trucks, centered on a prototype called Endurance. GM invested $75 million in the company, $25 million of which was cash and another $50 million in the form of “plant assets,” “plant permits,” and operating costs at the factory.
Lordstown’s stock has fallen under $1 a share
Flash forward to mid-2022, and Lordstown was able to sell the former GM factory to Foxconn for $230 million. The company later said it would loan out space from Foxconn while it searched for contract manufacturers to help with the production of the Endurance electric pickup truck. Afterward, Foxconn agreed to invest $170 million in Lordstown, which would amount to a 19 percent stake in the company. So far, Foxconn has paid $52.7 million to Lordstown, but the rest of the investment is now at risk.
In April 2023, Foxconn told Lordstown that it was in breach of its agreement, according to a regulatory filing. Lordstown had previously received a warning from the Nasdaq that its share price has been trading below $1 for the last 30 days, putting it at risk of delisting. Lordstown responded that the allegations were “without merit” and that it is negotiating with Foxconn to seek a resolution.
But so far, Foxconn has refused to revoke its “invalid termination notice,” forcing Lordstown to inform its investors that, if the money doesn’t come through, it will be “deprived of critical funding necessary for its operations.” Lordstown says it is evaluating “legal and financial alternatives in the event a resolution is not reached.”
