Lordstown recently resumed Endurance production, but the good news was short-lived as the company is now fighting for survival.
In a filing with the U.S. Securities and Exchange Commission, Lordstown revealed Foxconn is trying to abandon ship. As they explained, the Taiwanese tech giant sent them a letter claiming Lordstown was “in breach of the investment agreement due to its previously disclosed receipt of a notice from the Nasdaq” noting their stock price fell below the minimum for being listed on the exchange. Foxconn also proposed terminating the agreement unless Lordstown gets their stock price up within 30 days.
Lordstown responded by saying “it believes the breach allegations in the Foxconn notice are without merit.” The company went on to claim their partner “cannot exercise termination rights because Foxconn has breached the investment agreement by failing to use necessary efforts to agree upon the EV program budget and EV program milestones to facilitate the funding of the additional Preferred Stock investment.”
More: Foxconn Set To Take 18.3% Stake In Lordstown Motors As Electric Truck Maker Continues To Struggle
Given this, Lordstown believes the agreement remains in effect and “intends to enforce its rights.” They go on to claim Foxconn is intentionally trying to “invalidly terminate” the agreement and “withhold key funding” in a move that is detrimental to Lordstown.
The two sides are still talking, but Lordstown said “Foxconn has declined to revoke its invalid termination notice and has failed to confirm that it will proceed with the Subsequent Common Closing or any Preferred Stock closing.” As a result, Lordstown said “no assurances can be given” and they could be “deprived of critical funding necessary for its operations.”
While the company is up a certain creek without a paddle, Lordstown said they’re evaluating legal options and financial alternatives to Foxconn. That being said, the automaker noted “there is substantial doubt regarding our ability to continue as a going concern” and note their “ability to obtain additional financing is extremely limited under current market conditions.” Lordstown added they could be forced to “curtail or cease operations” and file for bankruptcy.
If that wasn’t bad enough, the company reiterated the Endurance’s bill of materials is “currently, and expected to continue to be, substantially higher than our selling price.” As a result, they lose money on each truck they sell.
Lordstown’s stock has plummeted with the news and was down nearly 44% as of this writing. That being said, the stock has been trending lower for months and hasn’t closed above a $1 per share since March.
H/T to Reuters
