SUMMARY
- Lordstown Motors files for Chapter 11 bankruptcy, plans to seek a buyer.
- Alongside bankruptcy filing, Lordstown files lawsuit against Foxconn over alleged breach of investment agreement.
- Lordstown previously sold its Ohio factory to Foxconn and agreed to a second deal involving further investment.
Lordstown Motors, an embattled producer of electric trucks, declared Chapter 11 bankruptcy on Tuesday, simultaneously announcing its plans to seek a buyer amid a contentious fallout with Taiwanese electronics manufacturing giant, Foxconn.
The announcement precipitated a drastic tumble in the company's stocks, which plunged over 60% in pre-market trading, signifying a stark investor response to the disconcerting news.
Concurrent with its bankruptcy announcement, Lordstown embarked on a legal tussle against Foxconn, alleging fraudulent behavior and a flagrant disregard for a pre-agreed investment pact. The pact entailed a maximum $170 million investment from Foxconn and a commitment to collaborative work on an assortment of new electric vehicles.
In a retort to Lordstown's allegations, Foxconn conveyed its disappointment over the turn of events, asserting it had sought a solution benefiting all stakeholders without leaning on "baseless legal actions". Given the lawsuit and Lordstown's perceived attempt to manipulate public sentiment, Foxconn declared the suspension of discussions and hinted at potential legal actions of its own.
Launched in 2019, with an erstwhile General Motors factory and the backing of the Trump administration, Lordstown had previously secured a deal to sell the Ohio factory to Foxconn for $230 million. In line with this arrangement, the two firms had agreed upon a second deal, where Foxconn would further invest up to $170 million in Lordstown, thus gaining a 19.3% stake in the startup.
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