LMC, Foxconn talks at standstill
Focus is on investment into startup EV maker
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LORDSTOWN -- Negotiations between Lordstown Motors Corp. and Foxconn -- the Taiwanese technology giant that has already invested millions into the struggling electric-vehicle maker -- over further investments are at a standstill, according to a regulatory document.
The companies are at an "impasse" and Foxconn has indicated to Lordstown Motors "it does not intend to close" May 8 on a common stock purchase worth about $47.2 million, Lordstown Motors reported Thursday to the U.S. Securities and Exchange Commission in its first quarter financial report.
The funding is part of a $170 million equity investment agreement the companies agreed to in November that called for Foxconn to close on a second round of funding following the agreement getting clearance by the Committee on Foreign Investment in the United States, which reviews certain transactions involving foreign investment in the U.S. to determine their effect on national security.
The committed OK'd the transaction April 21, meaning the common stock closing was supposed to happen on or before May 8.
Foxconn also agreed to purchase up to $70 million more shares in preferred stock once certain milestones related to predevelopment and design activities of a new joint EV program were achieved.
Lordstown Motors does not expect Foxconn to provide the EV program budget or milestones by Sunday, the filing states.
The first round of the funding for about $52.7 million in common and preferred stock closed Nov. 22.
If closing does not happen or is delayed "or such fundings do not occur" Lordstown Motors "will be deprived of critical funding" needed to operate, the filing states.
Not resolving the dispute with Foxconn and other challenges facing Lordstown Motors could lead to the company filing bankruptcy, the filing states.
In a regulatory filing Monday, Lordstown Motors announced it received notice April 21 from Foxconn it planned to terminate the investment deal because Lordstown Motors had received a delisting notice from Nasdaq, the exchange where the company's stock is traded.
Foxconn claimed Lordstown Motors breached the agreement and gave the company 30 days to cure the breach.
Lordstown responded, stating it believed the claim was without merit, that the agreement does not allow Foxconn to end it after the initial closing and fired back that Foxconn breached the agreement by "failing to use necessary efforts" to agree on the EV program budget and milestones.
Following Monday's regulatory filing, Foxconn the same day sent notice to Lordstown Motors that Foxconn agreed it was unable to terminate the agreement after the first closing but asserted the delisting notice "constitutes a breach of representation that is a condition" of the second common stock closing, Thursday's filing states.
The company has 180 days to come back into compliance with Nasdaq's rule. To do so, the closing bid price must be at least $1 per share for at least 10 days in a row before Oct. 16. Even then, Lordstown Motors could ask the exchange for more time.
Shareholders, when they meet May 22, will consider a stock split to try to help push up the price of Lordstown Motors stock.
The stock closed trading Thursday down 7 percent at 36 cents per share.
The latest filing states Lordstown Motors had cash, cash equivalents and short-term investments of about $176.7 million and a deficit of $998.9 million at the end of the first quarter March 31. The company had a net loss of $171.7 million over the period.