Lordstown Motors warned that it is in danger of failing as the electronics company Foxconn wavers on a $170 million investment in the commercial electric vehicle startup.
The Ohio company said in a regulatory filing on Monday that it had received notice from Foxconn on April 21 that it was in breach of their investment agreement because it had gotten a delisting warning from Nasdaq two days earlier.
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“As a result of these uncertainties, there is substantial doubt regarding our ability to continue as a going concern,” the company wrote.
Lordstown is in danger of being delisted from the Nasdaq because its share price closed below $1 on March 7 and it has not recovered since.
Foxconn told Lordstown that it may unwind the agreement if Lordstown did not resolve its listing issues.
Shares of Lordstown Motors Corp., based in Lordstown, Ohio, tumbled 28% in midday trading on Monday, to 13 cents each. Shares traded for as much as $29 in 2020.
Other EV manufacturers were dragged lower. Nikola, Fisker and Lucid dropped between 6% and 9%. Tesla fell 2%.
Lordstown said it's notified Foxconn that, among other things, it believes the breach allegations are without merit and that the terms of the investment agreement don't allow Foxconn to end the deal following the initial closing.
The companies are in talks, but Lordstown said Foxconn has refused to withdraw its termination notice and that it's evaluating its legal and financial options in case a resolution isn't reached.
In November Lordstown had announced that it had received approval to ship the first batch of its first model, the Endurance pickup.
The trucks were built in an old General Motors small-car assembly plant in Lordstown, Ohio, near Cleveland, that was purchased in 2021 by Taiwan’s Foxconn Technology Group, the world’s largest electronics maker.
Lordstown merged with DiamondPeak, a special purpose acquisition company, in 2020. Special purpose acquisition companies, or SPACs, are considered a quick route to becoming publicly traded and listing shares on an exchange.
SPACs can also be more risky for investors because the disclosure process before a company goes public is not a robust.
It has been a bumpy road for the startup and it has issued warnings about its viability before.
Lordstown CEO Steve Burns and Chief Financial Officer Julio Rodriguez stepped down in June 2021 on the same day the company acknowledged one potential buyer that committed to a large number of preorders didn’t appear to have the resources to complete that transaction, and other preorders appeared too vague or weak to be relied on for purchases.