Lordstown Motors Corp. Files for Bankruptcy and Sues Foxconn
On Tuesday, Lordstown Motors Corp. (LMC) filed for bankruptcy and sued Foxconn. The Ohio-based electric vehicle manufacturer has suffered numerous production delays, leading to the Hon Hai Technology Group/Foxconn backing out of its strategic partnership. However, former CEO Steve Burns managed to sell off all his shares before the company filed for Chapter 11. Burns sold roughly $59 million worth of stock by early 2023, including a disposal of 5 million shares in January. This left him as Lordstown Motor’s biggest shareholder, but he sold his remaining shares in three transactions since May 23rd, netting him more than $3.8 million.
The Hindenburg Research Report
Short-seller Hindenburg Research released a scathing report about the company having lied in regard to Endurance pre-orders and its general production capacity. The report suggested that Lordstown was little more than another “electric vehicle SPAC with no revenue and no sellable product, which we believe has misled investors on both its demand and production capabilities.” The document goes into great detail explaining how it saw the CEO as intentionally misleading investors — citing former employees who referenced Burns as a “con man” or “PT Barnum” type.
Lordstown’s Bankruptcy and Lawsuit Against Foxconn
Lordstown issued a press release explaining the bankruptcy and what it intends to do. The bankruptcy documents include motions to continue operations and uphold its responsibilities to stakeholders. But Lordstown also stated that it’s in the midst of trying to sell the Endurance vehicle and related assets. Considering Foxconn was supposed to handle production of those vehicles, had been given most of the company’s valuable assets (including the factory in Ohio), and is now being sued, our guess is that you’ll probably never see an LMC-branded pickup hitting the streets.
Lordstown’s release goes on to state that it believes Foxconn had “no intention of living up to its commitments, particularly with respect to the new vehicle development platform.” It likewise alleged that Foxconn “used its variety of contractual arrangements with the company as a tool to maliciously and in bad faith destroy Lordstown’s business—while leveraging resources gained through the partnership to advance its own business interests.”
Foxconn released its own statement in response, stating that LMC has continuously attempted to mislead the public and has been reluctant to perform the investment agreement between the two parties in accordance with its terms. Foxconn originally hoped to continue discussions and reach a solution that could satisfy all stakeholders, without resorting to baseless legal actions, but so far the two parties have yet to reach a consensus.
Lordstown’s Future
Lordstown, Ohio, always had a lot riding on the factory being a success and things appear to be imploding. But Lordstown Mayor Arno Hill has said he doesn’t want to assume the worst just yet, noting that Foxconn is currently operating at the facility without any tax breaks and has between 600 and 700 employees. “We have a lot of unknowns also, but you know, anything we get in that plant is a bonus for the village and the Valley,” he said.
Conclusion
Lordstown Motors Corp. filed for bankruptcy and sued Foxconn after suffering numerous production delays. Former CEO Steve Burns managed to sell off all his shares before the company filed for Chapter 11. Hindenburg Research released a scathing report about the company having lied in regard to Endurance pre-orders and its general production capacity. Lordstown issued a press release explaining the bankruptcy and what it intends to do. Foxconn released its own statement in response, stating that LMC has continuously attempted to mislead the public and has been reluctant to perform the investment agreement between the two parties in accordance with its terms. Lordstown, Ohio, always had a lot riding on the factory being a success and things appear to be imploding.
