Struggling electric-truck maker Lordstown Motors filed for Chapter 11 bankruptcy protection on Tuesday and said that it would put itself up for sale amid an ongoing dispute over investments that had been promised by Taiwanese manufacturer Foxconn.
Shares were down over 60% in premarket trading following the news.
Simultaneously with its bankruptcy filing, Lordstown filed a suit against Foxconn. The company accused Foxconn of fraud and of failing to abide by an agreement that called for the Taiwan-based firm to invest up to $170 million in Lordstown, and for the two to work together on a range of new electric vehicles.
In a statement provided to CNBC, Foxconn said it had hoped to continue discussions to reach a solution that would “satisfy all stakeholders” without “resorting to baseless legal actions.” But in light of the litigation and what it characterized as Lordstown’s attempts to “mislead the public,” it is suspending talks and reserving the right to take legal action of its own.
Lordstown, launched in 2019 with a factory acquired from General Motors and the enthusiastic support of the Trump administration, struck a deal to sell that Ohio factory to Foxconn for $230 million last year. Following the deal, which closed in May 2022, Lordstown and Foxconn agreed to a second deal in which Foxconn would invest up to $170 million in Lordstown, taking a 19.3% stake in the startup.
Foxconn paid the first $52.7 million due under that deal last year. The next payment, of $47.3 million, was due within 10 days of regulatory approval by the Committee on Foreign Investment in the United States. That approval was secured in late April, Lordstown said – but Foxconn never made the payment.
Instead, Foxconn told Lordstown that the startup had breached the deal by allowing its stock price to fall below $1 per share. (Lordstown executed a 1:15 reverse stock split in May, pushing its share price back over the critical $1 mark.)
In early May, Lordstown warned investors that a bankruptcy filing was likely if it didn’t reach an agreement with Foxconn or acquire additional funding elsewhere. A few days later, Lordstown said that it was nearly out of cash and that it would be forced to stop production of its Endurance electric pickup unless it could find a strategic partner.
Lordstown had just $108.1 million in cash available at the end of March, after losing $171.1 million in the first quarter.