At the time of the Spac boom on the stock exchange, investors were still cheering the electric truck manufacturer Lordstown. Even former US President Donald Trump (77) celebrated the start-up as the savior of a former GM factory. But the euphoria was quickly followed by disillusionment. The company has now filed for bankruptcy Lordstown on Tuesday with
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The stock fell 62 percent in premarket trading in New York. Lordstown was once worth five billion dollars on the stock market, and on Monday the market capitalization was less than $45 million.
Management decided to take the step after a dispute with Taiwanese iPhone manufacturer Foxxcon over an allegedly promised investment could not be settled, Lordstown said. The company also announced that it would sue Foxconn.
Lordstown had sold its northeast Ohio factory to Foxconn in November 2021. In this context, the two companies had agreed to work together on individual vehicles that were to be manufactured in the former General Motors production facility. Foxconn took a stake in Lordstown with around 53 million shares as part of the agreement and has since held an 8.4 percent stake in the electric car manufacturer.
Foxconn is said to have later promised to buy more Lordstown shares. The start-up now claims that Foxconn is resisting the agreement. The Taiwanese iPhone contract manufacturer “misled” the US company about the cooperation. In the statement, Lordstown speaks of “fraud, bad faith and repeated breaches of contract that would have led to the destruction of value” at the start-up.
Foxconn initially did not comment on the allegations on Tuesday. Already at the beginning of May
According to Reuters, Lordstown had warned that given the uncertainty about Foxconn’s investment, they were at risk of having to file for bankruptcy.
Founded in 2018, Lordstown went public in October 2020 through a merger with its shell company DiamondPeak Holdings. The company joined a slew of startups that raised billions of dollars from investors but did not keep their full-bodied promises
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Lordstown had announced that it would quickly produce hundreds of thousands of vehicles. The automaker’s flagship product is the electric pickup truck Endurance. To date, the project has not got off the ground, only a handful of trucks have left the production halls. At the beginning of the year, Lordstown even temporarily stopped production due to quality defects. In April, the start-up then resumed production, but a short time later warned of financial collapse.
As early as March 2021, Hindenburg Research had expressed serious doubts about Lordstown’s ability to set up mass production. The short seller also questioned the alleged pre-orders of 100,000 vehicles. In fact, a later investigation found that Lordstown had misrepresented its reservations. A short time later, in June 2021, Lordstown CEO Steve Burns and his chief financial officer Julio Rodriguez resigned.