Lordstown Motors Corp. (NASDAQ: RIDE), an electric-vehicle startup, has filed for Chapter 11 bankruptcy and is now putting its assets up for sale. In addition, the company has filed a lawsuit against chipmaker Foxconn over an investment disagreement. These developments have caused Lordstown’s shares to plummet by almost 60% in pre-market trading following the filing.
Lordstown Motors, founded in 2018, experienced significant success during the pandemic EV boom, with its shares peaking at $435 per share. At one point, the company had a market value of over $5 billion.
Former President Donald Trump played a role in the stock’s rise, as shares soared on the day Trump viewed a 2021 Lordstown Motors 2021 endurance truck.
“We’ve been working on this very long and very hard,” President Trump said on September 28 according to Fox News. “They went in and they have an incredible vehicle.”
However, as investors began to focus more on profitability, Lordstown’s shares steadily declined. In the most recent quarter, the company’s net sales amounted to just $189,000.
Despite its financial challenges, Lordstown still possesses attractive assets, including a manufacturing plant located in Lordstown, Ohio. Furthermore, the company recently resumed production and deliveries of its Endurance pickup truck in April. These processes were temporarily halted in February to address quality concerns.
Lordstown emphasized in a press release that the Endurance is a certified and launched vehicle, and it believes that it could potentially “serve as a spring board” for an original equipment manufacturer.
In the lawsuit against Foxconn, Lordstown alleges that the chipmaker failed to fulfill the terms of an agreement, which included a $47 million investment that has been put on hold.
“As one of the early entrants to the EV industry, we have delivered the Endurance, an innovative and highly-capable EV with significant commercial and retail potential – and had subsequently engaged with Foxconn in a purposeful, strategic partnership to leverage this expertise into a broader EV development platform,” Lordstown CEO and President Edward Hightower said in a statement. “Despite our best efforts and earnest commitment to the partnership, Foxconn willfully and repeatedly failed to execute the agreed-upon strategy, leaving us with Chapter 11 as the only viable option to maximize the value of Lordstown’s assets for the benefit of our stakeholders. We will vigorously pursue our litigation claims against Foxconn accordingly.”