Lordstown Motors could face bankruptcy after allegedly breaching its contract with Taiwanese technology manufacturer Foxconn.
According to Lordstown’s filing with the Securities and Exchange Commission (SEC) on Monday, May 1, the tech company had agreed to purchase shares worth approximately $100 million from the EV brand last November as part of its investing partnership. Foxconn bought $52.7 million in shares the same month, with the understanding that the remaining $47.3 million would be sent ten days after the deal received clearance from the Committee on Foreign Investment in the United States (CFIUS). The committee certified the transaction on April 25, 2023, requiring the Taiwanese corporation to complete the payment by May 8.
However, in a letter sent on April 21, Foxconn accused the automaker of breaching this investment agreement by failing to keep share prices at satisfactory levels. Since November, Lordstown’s stock values have fallen under the $1 minimum required for publicly traded companies in the U.S., placing the manufacturer at risk of losing its listing on The Nasdaq Global Select Market. The tech manufacturer asserted that such a scenario would void the November deal, and threatened to terminate the agreement if the situation was not rectified in 30 days.
In its SEC filing, the EV brand argues that the contract requires Foxconn to pay the remaining $47.3 million “in any event” once CFIUS certification is received. “Therefore, the Company believes that the Investment Agreement remains in effect, intends to enforce its rights thereunder, including with respect to Foxconn’s breach regarding…its knowing and intentional efforts to invalidly terminate the Investment Agreement and withhold key funding to the material detriment of the company,” Lordstown wrote. The automaker goes on to warn that its survival hinges on the remaining investment, without which it would be “deprived of critical funding necessary for its operations.” Should the funds never arrive, the EV brand concluded it may need to file for bankruptcy protection. Shortly after submitting its complaint to the SEC, the car company’s share price plummeted more than 23%, but showed signs of recovery the next day.
