Lordstown Motors is at risk of failing, again.
The electric vehicle startup that went public via a merger with SPAC warned investors Monday that it could be forced to file for bankruptcy because Foxconn could pull out of a critical financing deal, according to to a regulatory filing.
Taiwanese automaker Foxconn sent a letter to Lordstown on April 21 claiming the automaker was in breach of the investment agreement because its share price fell below $1 for 30 days and risked being delisted. the Nasdaq stock market. Foxconn warned that it would terminate the investment agreement if the breach is not resolved within 30 days.
While Lordstown disagreed with Foxconn’s claim, saying it intended to enforce its rights, the company also warned that withholding key funds would be detrimental to the company.
If the investment does not go through, Lordstown will not have the funds it needs to continue operating, according to the SEC filing. Lordstown said it is evaluating legal and financial alternatives in case no resolution is reached.
“As a result of these uncertainties, there are substantial doubts regarding our ability to continue as a going concern,” Lordstown wrote in the regulatory filing. “Our ability to obtain additional financing is extremely limited under current market conditions, particularly for our industry, and is also influenced by other factors including the significant amount of capital required, the Foxconn dispute, the fact that the listing of materials [bill of materials cost] of the Endurance is currently, and is expected to remain, substantially higher than our selling price, uncertainty surrounding the performance of any vehicle produced by us, significant exposure to material loss, and costs related to ongoing litigation and the investigation of the SEC, the Nasdaq Notice, the market price of our shares, and potential dilution from the issuance of additional securities.”
The company added that it would file for bankruptcy if it cannot resolve the dispute with Foxconn or identify other sources of financing.
Foxconn agreed last November increase your investment in Lordstown Motors through the purchase of $170 million in common shares and newly created 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 dealwhich included a direct investment of $50 million, Foxconn agreed to help Lordstown Motors build its Endurance pickup truck.
The November Deal, specifically the $100 million direct investment in preferred stock, replaced the joint venture financing announced last year by Foxconn and Lordstown Motors. The investment would be made in tranches and is subject to review by the United States Committee on Foreign Investment.
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