Lordstown Motors Files for Bankruptcy and Launches Lawsuit Against Foxconn

Lordstown Motors, a struggling electric-truck manufacturer, filed for Chapter 11 bankruptcy protection on Tuesday. The company also announced its intention to sell itself amidst an ongoing dispute with Taiwanese manufacturer Foxconn over promised investments.

Following the news, shares of Lordstown Motors plunged by as much as 60% in early trading, though they later recovered to close down 17% from the previous day’s close.

Concurrently with the bankruptcy filing, Lordstown also filed a lawsuit against Foxconn, accusing the company of fraud and of failing to fulfill an agreement to invest up to $170 million in Lordstown and collaborate on new electric vehicle projects.

In response, Foxconn stated that it had initially wanted to continue discussions to find a mutually satisfactory solution. However, due to the ongoing litigation and Lordstown’s alleged attempts to deceive the public, Foxconn has decided to suspend talks and reserve its right to take legal action.

Lordstown, which emerged in 2019 after acquiring a factory from General Motors with strong support from the Trump administration, sold that Ohio factory to Foxconn for $230 million in 2022. As part of the deal, which closed in May of the same year, Foxconn agreed to invest up to $170 million in Lordstown, acquiring a 19.3% stake in the startup company.

Last year, Foxconn paid the initial $52.7 million required under the agreement. The second payment of $47.3 million was due within 10 days of regulatory approval by the Committee on Foreign Investment in the United States. Although the approval was obtained in late April, Foxconn failed to make the payment.

Foxconn claimed that Lordstown had breached the agreement by allowing its stock price to drop below $1 per share. To rectify this, Lordstown executed a 1:15 reverse stock split in May, boosting its share price back above the critical $1 threshold.

In early May, Lordstown warned investors that a bankruptcy filing was likely unless an agreement was reached with Foxconn or alternative funding was secured. A few days later, Lordstown announced that it was running out of cash and unless it found a strategic partner, it would have to halt production of its Endurance electric pickup.

As of the end of March, Lordstown had only $108.1 million in available cash after suffering a loss of $171.1 million in the first quarter.