Lordstown Motors Corp filed for bankruptcy after the electric truck start-up’s investment agreement with manufacturing giant Hon Hai Precision Industry Co (鴻海精密) rapidly unraveled.
The US company’s Chapter 11 petition filed on Monday listed as much as US$500 million of assets and liabilities.
Lordstown would start a sale process to maximize the value of its Endurance electric pickup, it said in a statement.
Photo: Reuters
The company said it has also taken legal action against Hon Hai, known globally as Foxconn Technology Group (富士康科技集團).
The bankruptcy filing caps several tumultuous years that saw the firm go public through a merger with a special purpose acquisition company, fight off short-seller claims and a US Securities and Exchange Commission inquiry about inflated vehicle preorders, and sign the deal with Hon Hai in a bid to raise much-needed cash.
Lordstown on May 1 said that it might need to file for bankruptcy if the dispute with Hon Hai was not resolved.
The Taiwanese manufacturer notified Lordstown that it could terminate its investment due to a breach in their agreement.
Last year, Hon Hai agreed to invest as much as US$170 million in Lordstown and take two board seats. The deal gave the electric vehicle maker much-needed capital, while offering Hon Hai, a major iPhone assembler, a firmer foothold in automotive production.
Hon Hai also purchased a former General Motors Co factory in Lordstown, Ohio, from the company, and it planned to make Lordstown’s debut vehicle under contract.
In a complaint filed in bankruptcy court, Lordstown accused Hon Hai of fraudulent conduct and a series of broken promises in failing to abide by an agreement to invest up to US$170 million in the company.
Hon Hai previously invested about US$52.7 million in Lordstown as part of the agreement, and holds a roughly 8.4 percent ownership stake in the company.
Lordstown has said that Hon Hai was balking at purchasing additional shares of its stock as promised, and misled the electric truck maker about collaborating on vehicle development plans.
Hon Hai has said that Lordstown breached the investment agreement when the automaker’s stock fell below US$1 per share.
The Taiwanese firm did not immediately respond to a request for comment.
Additional reporting by Reuters
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