The Lordstown (RIDE) and Foxconn dispute is heating up. American EV startup Lordstown (RIDE) said in an SEC filing Friday it’s planning to take legal action against Foxconn over its latest investment agreement.
Despite the first batch of Lordstown Endurance models leaving its Ohio plant in November, Lordstown hit another setback as it halted production in February and issued a voluntary recall.
Things quickly worsened at Lordstown after receiving a delisting notice from the Nasdaq stock exchange due to its falling stock price. With Lordstown’s stock price falling below the $1 minimum for 30 consecutive days, the EV startup was at risk of getting kicked off the exchange.
As a result, Foxconn, which has been a lifeline for the company, injecting several funding rounds to keep the EV maker afloat, sent a letter to Lordstown stating it was in breach of its previous investment agreement.
Lordstown fired back by saying the allegations are without merit and, by the terms of the agreement, Foxconn is not permitted to terminate the contract following the initial closing.
Meanwhile, the EV startup said if Foxconn fails to hold up its side of the deal, “the company will be deprived of critical funding,” and it may need to “seek protection by filing a voluntary petition for relief under the Bankruptcy Code.”
Lordstown has since announced a 1 for 15 reverse stock split to boost the share price and get it back above the $1 min.
Lordstown to take legal action against Foxconn
According to the company’s latest 8K filing, Lordstown is now planning to take legal action. The company says in light of Foxconn’s latest conduct, it’s unlikely that it will complete the Subsequent Common Closing.
The filing added:
The company believes that Foxconn’s various breaches of the Investment Agreement and pattern of bad faith have caused material and irreparable harm to the company. Absent a prompt resolution, the company intends to enforce its rights through litigation.
Lordstown says there is “substantial doubt regarding our ability to continue as a going concern as a result of these events.”
The company adds its ability to obtain additional financing is “extremely limited” in the current market. In addition, Lordstown says a significant amount of capital required will be required to bring the Endurance pickup to market.
The EV startup says if it cannot come to a resolution with Foxconn or find other funding sources, it may need to further curtail or cease operations and seek bankruptcy protection.
Author: Peter Johnson
Source: Electrek
