Bankruptcy judge to hear former CEO's $10M bid for Lordstown Motors Wednesday
WILMINGTON, Del. - A $10 million offer from Lordstown Motors founder Steve Burns to buy the bankrupt company is the subject of a court hearing on Wednesday.
A judge in the U.S. Bankruptcy Court in Delaware will consider a bid to buy Lordstown Motor’s assets by LAS Capital LLC.
Burns, who is the majority equity holder of LAS, is Lordstown Motors' founder, former CEO, and board member. Lordstown Motors' former Chief Financial Officer, Julio Rodriguez, is one of the indirect managers of LAS Capital.
In a court document filed Monday in support of the sale, attorneys for Lordstown Motors claim that although Burns and Rodriguez were former directors and officers of the company, “they have no current management role with the Debtors and have no control or influence on the Debtors’ decisions. The Purchaser, Mr. Burns, and Mr. Rodriguez are no different than any other third-party buyer in the Court-approved sale process,” according to the filing.
Burns and Rodriguez resigned from their positions with Lordstown Motors on June 14, 2021, as a special committee looking into a damaging report by Hindenburg Research found "issues regarding the accuracy of certain statements regarding the company's pre-orders."
Although the committee concluded that Hindenburg's report was false and misleading, it found some credibility in claims about inaccurate pre-order disclosures made by LMC.
Over several months, Burns began selling off shares of Lordstown Motors he continued to hold, selling the last of his common stock on May 23, one day before Lordstown Motors initiated a reverse stock split to prevent delisting from the Nasdaq stock exchange.
The sale, which is subject to the approval of the Bankruptcy Court, includes assets related to the design, production, and sale of electric light-duty vehicles focused on the commercial fleet market.
LAS Capital has deposited 10% of the $10 million purchase price into an escrow account as a good faith deposit.
If the Asset Purchase Agreement is terminated due to a breach, LAS Capital will also be required to pay Lordstown Motors a $4 million termination fee.
LAS Capital would also have the right to terminate the Asset Purchase Agreement if the sale hearing does not occur on or before October 18, 2023, or if the Bankruptcy Court has not entered the Sale Order on or before October 21, 2023.
The proposed deal has met with opposition from the National Highway Traffic Safety Administration over concerns that terms of the sale would allow LAS to escape liability for recalls of the all-electric Endurance pickup truck.
According to NHTSA, the 2023 Lordstown Endurance truck is currently the subject of three open recalls.
“NHTSA is responsible for the health and safety of the American public,” say government attorneys in their filing objecting to such a provision.
