Lordstown Motors will issue a reverse stock split, a last-ditch move meant to get the EV automaker out of the penny stock doldrums and strike a deal with Taiwanese maker Foxconn.
Shares fell nearly 3.7% to $0.28 per share after the announcement.
Lordstown’s board approved a 1:15 reverse stock split during its May 22 shareholder meeting, the company said in a regulatory filing on Tuesday. For Lordstown, this means that when the market opens on Wednesday, each bundle of 15 shares will be added to 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 warned investors in a regulatory filing in early May that it could be forced to file for bankruptcy after Foxconn threatened to pull out of a critical funding deal. Foxconn previously agreed to buy approximately 10% of Lordstown’s common stock for $47.3 million. In late 2021, Foxconn will buy the company’s 6.2 million-square-foot factory in Lordstown, Ohio, for $230 million.
The controversy centers around Lordstown’s share price, which had fallen below the $1 mark, prompting Nasdaq to issue a delisting notice. Foxconn sent a letter to Lordstown on April 21 saying the automaker was in breach of the investment agreement because its stock price had fallen below $1 for 30 days and was in danger of being delisted on the Nasdaq exchange. Foxconn has warned that it will terminate the investment agreement if the breach is not resolved within 30 days.
The EV startup, which went public via a SPAC merger, said in its first-quarter earnings report that after repeatedly delaying production, failing to find a strategic partner for the truck, it will launch a new model “in the near future”. will cease production of its Endurance pickup trucks. Extremely limited ability to raise capital in the current market environment.
Lordstown suggested on Tuesday that Foxconn might stick with the deal if Foxconn’s share price remains above $1 per share for 10 consecutive trading days and Nasdaq determines that the bid price requirement has been met. can be assured. That, in turn, “could satisfy Foxconn’s interpretation of the (wrong) closing position 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 investments as of April 30, the company said in a regulatory filing.