EV startup Lordstown Motors (RIDE) filed for bankruptcy on Tuesday. Lordstown is also suing Foxconn after the companies failed to find common ground over a promised investment to keep the EV startup afloat.
Thus, the fate of the Endurance electric truck is again up in the air as the company plans to sell off its assets.
The Lordstown-Foxconn dispute started after the American EV startup received a stock delisting notice from the NASDAQ in April.
Lordstown’s stock exploded shortly after going public in late 2020, along with other EV startups, including Nikola (NKLA), Canoo (GOEV), Faraday Future (FFIE), and Arrival (ARVL). However, the excitement quickly faded after a short seller released a report accusing Lordstown of inflating pre-order numbers for the Endurance electric pickup.
The situation worsened after CEO Stephen Burns (also the founder) and CFO Julio Rodriquez abruptly resigned in June 2021.
On the verge of bankruptcy, Taiwanese manufacturing giant Foxconn stepped in to buy the company’s facility with an additional +$100 million investment to spur production.
Despite claiming the initial batch of 500 Endurance truck models was out for delivery in November, Lordstown halted production earlier this year, issuing a voluntary recall over quality issues.
Lordstown’s shares fell over 95% since going public, slipping below the NASDAQ exchange’s $1.00 minimum for 30 consecutive trading days.
Foxconn claimed the EV startup violated their initial equity purchase agreement and, as a result, refused to invest the final $43.7 million. Despite attempting a 1:15 reverse stock split to boost share prices, the companies have failed to come to an agreement, leaving Lordstown no choice but to file for bankruptcy.
Lordstown files for bankruptcy and sues Foxconn
According to Lordstown’s 8K filing on Tuesday, the restructuring process will consist of two parts.
For one, Lordstown filed litigation against Foxconn in the US Bankruptcy Court for the District of Delaware. The EV startup alleges Foxconn’s actions led to material damage to the company.
As a result of the “direct consequence of the material and irreparable harm caused by Foxconn,” Lordstown filed for Chapter 11 bankruptcy. The company says the restructuring will enable an “expedited timeline for hearing the Foxconn litigation.”
Edward Hightower, CEO and president of Lordstown, explained:
As one of the early entrants to the EV industry, we have delivered the Endurance, an innovative and highly-capable EV with significant commercial and retail potential – and had subsequently engaged with Foxconn in a purposeful, strategic partnership to leverage this expertise into a broader EV development platform. Despite our best efforts and earnest commitment to the partnership, Foxconn willfully and repeatedly failed to execute on the agreed-upon strategy, leaving us with Chapter 11 as the only viable option to maximize the value of Lordstown’s assets for the benefit of our stakeholders. We will vigorously pursue our litigation claims against Foxconn accordingly.
Lordstown says it will sell the IP of the Endurance electric truck and related assets like IP rights and its platform to maximize their value.
Hightower says he remains confident that the Endurance electric truck will find new and supportive ownership and that the company will continue to support customers through the transition.
Lordstown shares are down another 45% during Tuesday’s trading session as investors digest the news.
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