Lordstown Motors, an electric vehicle (EV) startup, has been in the news for all the wrong reasons lately. The news of the company’s potential bankruptcy is a significant blow to its efforts to establish itself in the competitive EV market.
Lordstown hangs in the balance as its shares fell over 23% on May 1, and the company disclosed in a regulatory filing that it may have to file for bankruptcy protection if the deal falls through. On April 21, Foxconn sent a letter to the startup stating that Lordstown had violated an investment agreement due to its stock price falling below a dollar per share for thirty (30) continuous trading days. As a result, NASDAQ issued a delisting notice.
Last year, Lordstown struck a deal to sell its Ohio factory to Foxconn, and both companies agreed on a second deal where Foxconn would invest up to $170 million, which would amount to a 19.3% stake. While Foxconn paid the first $52.7 million due under the deal last year, the remainder, and the deal itself, are now at risk.
Foxconn was required to invest $47.3 million within ten days of regulatory approval by the Committee on Foreign Investment in the United States, which was obtained on April 25. However, Lordstown fears that Foxconn won’t meet the May 8 deadline, and Foxconn has not made sufficient effort to complete an EV plan as part of the deal.
Both companies had set a deadline of May 7 to complete a collaborative plan for a new EV. If the deadline is met, Foxconn will be required to invest an extra $70 million. Lordstown alleged that Foxconn is not putting in “reasonable efforts” to complete the plan, resulting in it not being finalized.
Lordstown expressed its criticism of Foxconn’s actions as “completely unwarranted” in a statement to CNBC, stating that it has caused significant damage to the company that may become irreparable. The startup cautioned in the submission that it might have to file for bankruptcy protection if the agreement with Foxconn does not materialize. Although the company had $221.7 million on hand at the end of 2022, it lost over $100 million in the fourth quarter.
The start-up’s funding struggles are the latest example of the challenges faced by EV startups, which require huge investments to develop vehicles and build factories. Besides Lordstown, Nikola, Faraday Future, and Lucid Motors have also been facing funding issues.
Lordstown’s financial struggles have raised doubts about its ability to fulfill orders for its Endurance pickup truck designed for commercial fleet customers. The startup began the production of this vehicle in 2020 with over 100,000 preorders. Lordstown has accused Foxconn of failing to complete the EV plan, and Foxconn has accused the company of violating an investment deal.
As Lordstown and Foxconn try to resolve their differences, the EV industry keeps growing with new technologies and startups emerging. They are pushing the boundaries of what’s possible and driving a cleaner, more sustainable future.
