Lordstown Motors turns to a reverse stock split to save Foxconn deal
Lordstown Motors will issue a reverse stock split, a last-ditch move meant to pull the EV automaker out of the penny stock doldrums and salvage a deal with Taiwanese manufacturer Foxconn.
The stock fell about 3.7% to $0.28 a share following the announcement.
Lordstown's board approved a 1:15 reverse stock split during its shareholder meeting May 22, the company said in a regulatory filing Tuesday. For Lordstown, this means that when the market opens Wednesday, each bundle of 15 shares will be combined into one issued and outstanding share of common stock. The company said it will adjust outstanding equity-based awards and that no fractional shares will be issued in connection with the reverse stock split.
Lordstown cautioned investors in an early May regulatory filing that it could be forced to file for bankruptcy because Foxconn had threatened to pull out of critical funding deal. Foxconn has previously agreed to buy about 10% of the Lordstown's common stock for $47.3 million. In late 2021, Foxconn bought the company's 6.2-million-square-foot factory in Lordstown, Ohio, for $230 million.
The dispute centers around Lordstown's stock price, which had fallen below the $1 mark, prompting Nasdaq to issue a delisting notice. Foxconn sent a letter on April 21 to Lordstown stating the automaker was in breach of the investment agreement because its stock price fell below $1 for 30 days and was at risk of being delisted on the Nasdaq exchange. Foxconn warned it would terminate the investment agreement if the breach was not resolved within 30 days.
The EV startup that went public via a SPAC merger said in its first-quarter earnings report that it would likely cease production of its Endurance pickup truck "in the near future” after repeated production delays, failing to find a strategic partner for the truck and extremely limited ability to raise capital in the current market environment.
Lordstown suggested Tuesday that Foxconn might be convinced to stick with the deal if its stock price remains above $1 per share for 10 consecutive trading days and Nasdaq determines that the bid price requirement has been satisfied. That in turn "may satisfy Foxconn's (incorrect) interpretation of the closing condition and cause Foxconn to close the transaction," Lordstown said in a regulatory filing.
Lordstown Motors had just $165 million in cash, cash equivalents and short-term investment as of April 30, the company said in the regulatory filing.
A growing number of mobility companies that went public via SPAC mergers are turning to reverse stock splits as share prices have plummeted below $1 per share. Micromobility company Helbiz, shared scooter company Bird and EV company Arrival all issued reverse stock splits in the past several months.