Shares of American electric vehicle maker, Lordstown Motors Corp (NASDAQ:RIDE) plunged by over 50% Monday after Foxconn (TW:2354), one of the company’s biggest investors, alleged the automaker breached their $170 million investment deal.
Lordstown said in a Monday regulatory filing that it received a letter from Foxconn on April 21 alleging that the startup was in breach of an investment deal because its stock had fallen under $1 per share for 30 consecutive trading days.
The EV company said Foxconn cited the delisting notice the Ohio-based company received from Nasdaq in a letter alleging the breach.
Lordstown rejected the allegation and said it was in talks with the Taiwanese company to seek a resolution.
Under the terms of the deal, Foxconn is supposed to invest $47.3M within 10 days of regulatory approval by the Committee on Foreign Investment in the United States. That approval was secured on April 25, Lordstown said, meaning that Foxconn is obliged to make that investment by May 8.
Lordstown said it’s concerned that further investment won’t come in before that deadline, and that Foxconn doesn’t seem to be making a good faith effort to complete an EV plan that is one of the deal’s milestones.
"Foxconn’s actions are completely unwarranted. Their course of conduct has resulted in material — and what is becoming irreparable — harm to the company," Lordstown said in a statement.
"In the absence of a timely resolution, we will take all actions necessary to protect our business interests and enforce all of our rights and remedies."
Lordstown warned that it may be forced to file for bankruptcy protection if the Foxconn deal falls through. The company still had $221.7M on hand as of the end of 2022, but it lost over $100M in the fourth quarter.
Shares of RIDE are down 50.26% in mid-day trading on Monday.