Lordstown savior Foxconn is threatening to drag funding

Lordstown Motors is vulnerable to failing — once more.

The EV startup that went public through a SPAC merger cautioned buyers Monday that it could be pressured to file for chapter as a result of Foxconn might pull out of a essential funding deal, in accordance to a regulatory submitting.

Taiwanese producer Foxconn despatched a letter April 21 to Lordstown stating the automaker was in breach of the funding settlement as a result of its inventory worth fell beneath $1 for 30 days and was vulnerable to being delisted on the Nasdaq alternate. Foxconn warned it might terminate the funding settlement if the breach shouldn’t be resolved inside 30 days.

Whereas Lordstown disagreed with Foxconn’s assertion and stated it supposed to implement its rights, the corporate additionally warned that withholding key funding could be detrimental to the corporate.

If the funding doesn’t undergo, Lordstown received’t have the funding it must proceed working, in keeping with the SEC submitting. Lordstown stated it’s evaluating authorized and monetary options within the occasion a decision shouldn’t be reached.

“Because of these uncertainties, there may be substantial doubt concerning our means to proceed as a going concern,” Lordstown wrote within the regulatory submitting. “Our means to acquire further financing is extraordinarily restricted beneath present market situations, specifically for our trade, and likewise influenced by different elements together with the numerous quantity of capital required, the Foxconn dispute, the truth that the BOM [bill of materials cost] of the Endurance is presently, and anticipated to proceed to be, considerably increased than our promoting worth, uncertainty surrounding the efficiency of any automobile produced by us, significant publicity to materials losses and prices associated to ongoing litigation and the SEC investigation, the Nasdaq Discover, the market worth of our inventory and potential dilution from the issuance of the extra securities.”

The corporate added it might file for chapter if it’s unable to resolve the dispute with Foxconn or determine different sources of funding.

Foxconn agreed final November to enhance its funding in Lordstown Motors by shopping for $170 million in frequent inventory and newly created most popular shares. The extra funding got here a 12 months after Lordstown offered its 6.2-million-square-foot manufacturing unit to Foxconn. As a part of that $230 million deal, which included a direct funding of $50 million, Foxconn agreed to assist Lordstown Motors manufacture its Endurance pickup truck.