Lordstown Motors is at risk of failing — again.
The EV startup that went public via a SPAC merger cautioned investors Monday that it may be forced to file for bankruptcy because Foxconn may pull out of a critical funding deal, according.
Taiwanese manufacturer Foxconn sent a letter April 21 to Lordstown stating the automaker was in breach of the investment agreement because its stock price fell below $1 for 30 days and was at risk of being delisted on the Nasdaq exchange. Foxconn warned it would terminate the investment agreement if the breach is not resolved within 30 days.
While Lordstown disagreed with Foxconn’s assertion and said it intended to enforce its rights, the company also warned that withholding key funding would be detrimental to the company.
If the investment doesn’t go through, Lordstown won’t have the funding it needs to continue operating, according to the SEC filing. Lordstown said it is evaluating legal and financial alternatives in the event a resolution is not reached.
“As a result of these uncertainties, there is substantial doubt regarding our ability to continue as a going concern,” Lordstown wrote in the regulatory filing. “Our ability to obtain additional financing is extremely limited under current market conditions, in particular for our industry, and also influenced by other factors including the significant amount of capital required, the Foxconn dispute, the fact that the BOM [bill of materials cost] of the Endurance is currently, and expected to continue to be, substantially higher than our selling price, uncertainty surrounding the performance of any vehicle produced by us, meaningful exposure to material losses and costs related to ongoing litigation and the SEC investigation, the Nasdaq Notice, the market price of our stock and potential dilution from the issuance of the additional securities.”
The company added it would file for bankruptcy if it’s unable to resolve the dispute with Foxconn or identify other sources of funding.
Foxconn agreed last November toby buying $170 million in common stock and newly created preferred shares. The additional investment came a year after Lordstown sold its 6.2-million-square-foot factory to Foxconn. As part of that , which included a direct investment of $50 million, Foxconn agreed to help Lordstown Motors manufacture its Endurance pickup truck.
The November deal, specifically the $100 million direct preferred stock investment, replaced the joint venture funding announced last year by Foxconn and Lordstown Motors. The investment was to occur in tranches and is subject to a review by the Committee on Foreign Investment in the United States.