Lordstown delays plant sale to Foxconn
Lordstown Motors (NASDAQ: RIDE) announced on Monday it would delay the sale of its Ohio manufacturing plant to Foxconn by four days. The company also stated it would need an additional $150 million in capital to begin boosting production of its initial vehicle, the Endurance, an all-electric pickup truck.
The announcement of the delay in the sale of its plant to Foxconn sent Lordstown shares spiraling down to $1.55 per share on Monday. At the time of writing, Lordstown shares were trading at $1.82, still down about 4.7 percent on the day.
In November 2021, Lordstown announced during its Q3 earnings call that it had reached an agreement in principle to sell its assembly plant in Lordstown, Ohio, to Foxconn, a Taiwan-based electronics manufacturer. The deal was set to be finalized in April, but the companies both agreed on a slight deadline extension. Now, the agreement deadline has been extended once again from May 14 to May 18, as Lordstown said it will delay investment in tooling that would lower the cost of manufacturing its vehicles.
Foxconn has already paid $200 million in down payments for the plant and only owes $30 million more.
“We’ve had constructive discussions with Foxconn,” Lordstown CEO Dan Ninivaggi said. “It’s a complex deal. It’s taking a little bit longer than we expected. The fact that Foxconn agreed to extend the repayment deadline is a good sign.”
The situation gets tricky due to Lordstown’s dire financial state. If the deal is not finalized by the new May 18 deadline and the parties do not agree to extend it once more, Lordstown would have to pay back the $200 million in down payments it has already received from Foxconn. The automaker has admitted it does not have the cash to do so, according to Bloomberg. The companies are working to complete the agreement that also includes a contract manufacturing arrangement with Foxconn, which could include a joint venture into the development of EVs.
Lordstown also said it would need to raise $150 million in cash this year because of deferred tooling investments. Tooling is imperative for the production of the Endurance, because without it, the cost to build the pickup will exceed its sale price.
The Endurance is set to begin production sometime in Q3 2022, Lordstown said. Production is about a year past its originally scheduled date. Lordstown plans to begin deliveries for at least some of the Endurance pickups in 2023.
Lordstown missed consensus estimates for earnings per share, losing 46 cents apiece in Q1, just .01 more than analysts estimated.