Fears that Lordstown Motors (NASDAQ:RIDE) may go bankrupt are increasing today. This comes after the company said it will sue to make Foxconn (OTCMKTS:HNHPF) go through with its in Lordstown. As of this writing, shares of RIDE stock are up about 1%.
Foxconn, a Taiwanese contract manufacturer that trades as Hon Hai Precision, originally planned to invest $170 million into making Lordstown’s Endurance pick-up truck. The company first invested $52.7 million but is now refusing to invest more, “balking at purchasing additional shares, citing a breach of their agreement.”
Lordstown has a market capitalization of around $57 million after a 1-for-15 reverse stock split . The company believes it if it can’t find additional capital.
RIDE Stock: The Ride Is Ending
Foxconn is best known for helping assemble the Apple (NASDAQ:AAPL) iPhone in China. More recently, the company has sought to make electric vehicles (EVs) on the same basis, including in the United States.
The company — once a General Motors (NYSE:GM) assembly plant — last year. The value of the plant was listed as $230 million.
Production also began on last year. Lordstown focused marketing on fleet buyers after Ford
(NYSE:F), Rivian (NASDAQ:RIVN) and GM all . The Endurance costs $65,000, offers a range of 200 miles per charge and has a four ton towing capacity .
Earlier this year, Endurance production was paused over quality control issues. Production then resumed in April at a slower pace. Lordstown then reached a with .
After RIDE received a Nasdaq delisting notice, Foxconn said Lordstown . Lordstown’s subsequent said the company would have to stop production without a new source of funds.
An followed that, with Lordstown saying terms of the stock sale had been adjusted for the reverse split. Hon Hai’s lawyers .
What Happens Next?
It’s how a court would force Foxconn to pay $47 million for a 10% stake in a company now worth $57 million. The likeliest scenario is that Foxconn writes off its RIDE stock mistake.
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On the date of publication, Dana Blankenhorn held a long position in AAPL stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
