Lordstown Motors (RIDE) shares collapsed Tuesday after the electric truckmaker filed for Chapter 11 bankruptcy protection after failing to secure an investment from Taiwan-based electronics group Foxconn.
In a filing submitted to the U.S. Bankruptcy Court in Delaware, Lordstown said Foxconn, the world's biggest smartphone assembler and a key supply chain partner to Apple (AAPL), failed to live up to an agreement to provide $170 million in fund. Foxconn holds an 8.4% stake in the group based on a previous funding around worth around $53 million.
Lordstown's complaint against Foxconn -- formally known as Hon Hai Precision Manufacturing-- alleges that the group, which purchased the truckmaker's Lordstown, Ohio facility at a knock-down price in 2022, acted in "bad faith destroy Lordstown's business" while advancing its own interests.
"As one of the early entrants to the EV industry, we have delivered the Endurance, an innovative and highly-capable EV with significant commercial and retail potential – and had subsequently engaged with Foxconn in a purposeful, strategic partnership to leverage this expertise into a broader EV development platform," said CEO Edward Hightower.
"Despite our best efforts and earnest commitment to the partnership, Foxconn willfully and repeatedly failed to execute on the agreed-upon strategy, leaving us with Chapter 11 as the only viable option to maximize the value of Lordstown's assets for the benefit of our stakeholders," he added. "We will vigorously pursue our litigation claims against Foxconn accordingly."
Lordstown Motors shares were marked 36.4% lower in early afternoon trading to change hands at $1.76 each. The stock hit an all-time low of $1.14 each immediately after the opening bell.
Lordstown Motors, which suspended the production of its signature Endurance truck earlier this year amid a host of supply chain disruptions, is seeking a buyer for the whole of the business, but hasn't yet established a 'stalking horse', or minimum value bidder.
However, the group said it has "significant" cash on hand, and is debt free, and will continue with its normal operations during the Chapter 11 process.
"We remain confident that an orderly, expedited sale process will maximize value for our stakeholders and enable the talent and technology behind the Endurance to find new and supportive ownership," Hightower said.
