Lordstown Motors is preparing to sue Foxconn, the Taiwanese manufacturer once considered a savior to the beleaguered EV maker.
Lordstown said Friday in a regulatory filing that it will sue Foxconn if the company pulls out of an investment agreement and fails to buy nearly 10% of the EV company’s shares. The threat of litigation comes as Lordstown scrambles to raise capital and stay in business. Lordstown said in its first-quarter earnings report that it would likely cease production of its Endurance pickup truck “in the near future” after repeated production delays, failing to find a strategic partner for the truck and extremely limited ability to raise capital in the current market environment.
The EV maker, which became publicly traded following a merger with a special purpose acquisition company, has faced a long string of capital challenges and internal scandals. In September 2021, it appeared that Lordstown had found a solution when Foxconn agreed to buy its 6.2-million-square-foot factory in Ohio and build its EVs. Foxconn agreed, at the time, to pay $230 million for the facility and buy about 10% of the Lordstown’s common stock for $47.3 million.
The relationship frayed however as Lordstown’s share price fell below $1, prompting Nasdaq to issue a delisting warning. Foxconn sent a letter in April 2023 to Lordstown stating the automaker was in breach of the investment agreement because its stock price fell below $1 for 30 days and was at risk of being delisted on the Nasdaq exchange. Foxconn warned it would terminate the investment agreement if the breach was not resolved within 30 days.
Lordstown cautioned investors in May 2023 that it could be forced to file for bankruptcy because Foxconn had threatened to pull out of the critical funding deal. Lordstown’s board has since approved a 1:15 reverse stock split during its shareholder meeting May 22 in a last-ditch move meant to pull the EV automaker out of the penny stock doldrums and salvage its deal with Foxconn.