Lordstown Motors, an electric vehicle (EV) company known for its merger with a special purpose acquisition company in 2020, has taken legal action against Taiwanese manufacturing firm Foxconn. Alongside the lawsuit, Lordstown Motors has filed for bankruptcy and announced its intention to find a buyer.
The bankruptcy filing, under Chapter 11 protection in Delaware, marks a significant development in Lordstown's dispute with Foxconn over an investment agreement. Lordstown accuses Foxconn of fraudulent conduct that has harmed the American startup, alleging that Foxconn failed to fulfill its obligations and purchase a substantial number of shares.
In 2021, Foxconn acquired Lordstown's manufacturing facility in Ohio and agreed to pay $230 million for a 10% stake in the company. However, as Lordstown's stock prices declined and fell below $1, the Nasdaq issued a warning, breaching the agreement. Foxconn threatened to terminate the investment deal unless Lordstown resolved the situation.
To avoid bankruptcy, Lordstown implemented a reverse stock split. As of Tuesday, Lordstown's stock closed at $2.76.
Lordstown's complaint alleges that Foxconn deceived the EV company by promising collaboration on vehicle development plans but failed to deliver. The lawsuit claims that Foxconn's true intention was to gain control of Lordstown's Ohio manufacturing plant and poach skilled employees.
The bankruptcy filing and lawsuit raise questions about Foxconn's electric vehicle promises and partnerships with other automakers. Lordstown's plans to find a buyer are underway, with an upcoming auction to be held. However, no initial offers have been received.
