Lordstown Motors Corp RIDE on Monday warned that it might have to file bankruptcy after Hon Hai Precision Industry Co Ltd HNHPF affiliate Foxconn Ventures Pte Ltd sought to withdraw from an agreement for a $170 million investment.
What Happened: Lordstown received a notice from Foxconn on April 21 seeking to withdraw from the investment agreement citing a breach of conditions, the EV maker said in a statement.
If Lordstown fails to rectify the breach within 30 days, Foxconn would terminate the agreement, the notice said. Lordstown, however, believes the allegations have no merit and that the investment agreement continues to be in effect.
The EV maker is now in discussion with Foxconn to seek a resolution. However, Foxconn has not revoked the termination notice to date.
“If we are unable to resolve our dispute with Foxconn in a timely manner on terms that allow us to continue operating as planned, identify other sources of funding, identify a strategic partner, and resolve our significant contingent liabilities, we may need to curtail or cease operations and seek protection by filing a voluntary petition for relief under the Bankruptcy Code,” Lordstown said.
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Why It Matters: Foxconn agreed to make the equity investment in the electric vehicle firm in November. The investment was intended to fund Lordstown’s new electric vehicle program in collaboration with Foxconn.
In March, the struggling automaker reported a 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.
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