Electric vehicle startup Lordstown Motors in an SEC filing made on Monday warned of potential bankruptcy should an investment deal with Foxconn fall through.
The deal, made last November, requires Foxconn investing up to $170 million in Lordstown in return for shares in the startup.
However, in its latest filing, Lordstown alleged that Foxconn in a letter sent on April 21 had claimed Lordstown was in breach of the original agreement due to its share price dropping below the $1 threshold required for listing on the Nasdaq Global Select Market, and was threatening to cancel the agreement if the issue wasn’t rectified within 30 days.
Lordstown’s share price is trading at 40 cents at the time of writing.
The two companies in March also announced a deal to develop a new EV based on a Foxconn platform, a deal in which Foxconn would invest an additional $70 million. However, without the investment of the previous deal, Lordstown warned that it will be deprived of “critical” funding necessary for its operations.
Lordstown said it was continuing to negotiate with Foxconn.
Foxconn, a contract manufacturer famous for building iPhones for Apple, first became involved with Lordstown in 2021 when it agreed to purchase the startup’s Ohio plant and build its Endurance electric pickup truck under contract.
Production of the Endurance got underway in late 2022 but was halted in February when an electrical issue was discovered, with only a handful of trucks actually completed. Production resumed in April, but the trucks continue to be built in very small numbers. Lordstown in its filing said the bill of materials for the Endurance was “substantially” higher than the selling price of the truck, and is expected to remain that way.