Lordstown Motors declares impasse with Foxconn over investment deal
Lordstown Motors Corporation has announced that negotiations with Foxconn to avoid possible bankruptcy or a shutdown of operations have reached an impasse.
In a document filed with the Security and Exchange Commission, Lordstown Motors said that it is in discussions to resolve Foxconn’s contention that the Taiwan-based company would no longer be obligated to go through with a $170 million investment deal.
Foxconn alleges that Lordstown Motors breached the terms of the investment deal because the value of LMC’s RIDE stock fell below $1 a share long enough to prompt the NASDAQ to issue a notice that it was in danger of being delisted from the stock exchange.
According to the SEC filing, Foxconn has indicated that it does not intend to close the deal on Monday and Lordstown Motors doesn’t expect Foxconn to approve LMC’s budget for its Endurance EV pickup truck by Sunday.
If the closing of the investment deal is delayed or doesn’t happen, Lordstown Motors says it won’t have critical funding for operations.
Lordstown Motors is challenging Foxconn’s assertion that LMC has breached the investment agreement and intends to enforce what it calls “its contractual rights”.
LMC says it continues to evaluate its legal and financial alternatives in the event a resolution is not reached.
As a result of the uncertainties, Lordstown Motors says there is “substantial doubt” regarding its ability to continue as a going concern.
“If we are unable to resolve our dispute with Foxconn in a timely manner on terms that allow us to continue operating as planned, identify other sources of substantial funding, identify a strategic partner, and resolve our significant contingent liabilities, we may need to further curtail or cease operations and seek protection by filing a voluntary petition for relief under the United States Bankruptcy Code”, says LMC in the regulatory filing.
Lordstown Motors says it is seeking strategic partners, including other automakers, to provide additional capital and other support to enable them to continue Endurance production and to develop new vehicle programs.
As of Thursday, Lordstown Motors says it has not identified a strategic partner for Endurance.
On April 19, LMC was notified by Nasdaq that, because the closing bid price for the Company’s Class A common stock had fallen below $1.00 per share for 30 consecutive business days, the company was no longer in compliance with the Bid Price Requirement.
NASDAQ has given LMC a 180 day “cure period” until October 16 to come into compliance.
Among the various courses of action being considered by Lordstown Motors is the implementation of a reverse stock split if such action is authorized by the Company’s stockholders at its annual meeting of stockholders to be held on May 22, 2023.