EV maker Lordstown Motors Corp RIDE filed for bankruptcy protection on Tuesday, following a drawn-out dispute with Foxconn over a $170 million investment.
What Happened: The company said that it started the sale process for its Endurance all-electric pickup truck and other related assets and has filed litigation against Hon Hai Precision Industry Co Ltd and its affiliate Foxconn Ventures Pte Ltd in the U.S. Bankruptcy Court for the District of Delaware.
Foxconn failed to live up to its financial commitments, thereby damaging the company and its future prospects, the EV maker said.
"Despite our best efforts and earnest commitment to the partnership, Foxconn willfully and repeatedly failed to execute 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," CEO Edward Hightower said.
He added that the company would pursue its litigation claims against Foxconn "vigorously."
The company said it has significant cash on hand and is debt-free. Lordstown said that the “right buyer” — an automaker or other strategic purchaser — can utilize the Endurance platform to create multiple EV variants at a fraction of the time and cost it would take to start a program from scratch, it added.
Why It Matters: Lordstown received a notice from Foxconn on April 21 seeking to withdraw from the investment agreement citing a breach of conditions, following which the companies engaged in discussions for a resolution. Early in May, the company warned that it may need to cease operations and file for bankruptcy if it is unable to resolve the dispute or identify other sources of funding.
Days after warning of bankruptcy, the company also said that it expects the production of its Endurance truck to cease in the near future. The struggling automaker started commercial production of Endurance in 2022 third quarter and completed the assembly of the first two Endurance vehicles in September.
Lordstown was launched in 2018 and went public in October 2020. In March, it reported fourth-quarter FY22 net sales of $0.194 million, missing the consensus of $1.29 million, and a loss per share of $0.45 missing the consensus loss of $0.27.
Price Action: Lordstown shares closed down 7.2% at $2.76 on Monday and crashed 54.43% in premarket hours on Tuesday, according to data from Benzinga Pro.
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