Shares of beleaguered electric vehicle startup Lordstown, Inc. (NASDAQ:RIDE) are plunging in premarket trading on Wednesday.
The Lordstown, Ohio-based company said it has opted to file for Chapter 11 bankruptcy protection even as it goes ahead with litigation against its manufacturing partner Hon Hai Precision Manufacturing Company Limited, popularly called Foxconn, in the U.S. Bankruptcy Court for the District of Delaware.
Lordstown alleged that Foxconn committed fraud with its consistent failure to live up to its commercial and financial commitments to the U.S. EV maker. Foxconn’s actions led to material damage to the company as well as its future prospects, it said.
The U.S. company also said it has commenced a comprehensive marketing and sale process for the Endurance EV pickup truck and related assets.
Lordstown and Foxconn negotiated a deal in 2021 which provided for the Taiwanese company to buy the former’s Ohio plant for $230 million. Foxconn also agreed to buy $50 million in Lordstown stock. In May 2022, the companies announced the closing of the asset purchase agreement and said Foxconn will invest $100 million in a joint venture company floated by the two.
Foxconn agreed to infuse an incremental $170 million into the struggling U.S. company in September 2022 by subscribing to a combination of common stock and preferred stock.
Cash-strapped Lordstown’s stock continued to see weakness amid fundamental woes, falling below the $1 mark. This elicited a delisting warning from the SEC and consequent to which Foxconn threatened to pull out of the deal.
Lordstown warned in May that it could be forced to file for bankruptcy if Foxconn’s funding doesn’t come through. Subsequently, the company announced a 1:15 reverse stock split to regain compliance.
In premarket trading on Wednesday, Lordstown stock plummeted 50.09% to $1.38/
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Edited by Suparba Sil and Virginia Van Zandt
