Global technology company Foxconn has announced that it will invest at least another $70 million and up to $170 million in total in electric car startup Lordstown Motors. Foxconn’s $70 million investment in Lordstown common stock will help the company with its corporate strategy, while the two parties transition their previously announced $100 million joint venture into a preferred stock investment that will fund “a new EV’ operated by Lordstown Motors instead.
Lordstown Motors Corp. ($RIDE) is an EV startup with a short but colorful history. The company swung for the fences early as it blew away its first vehicle, the Endurance pickup truck. With over 100,000 bookings reported, there was much to be excited about initially.
However, the buzz from Lordstown began to slow after one of the Endurance prototypes caught fire in early 2021, quickly followed by a less-than-stellar performance at the San Felipe 250 due to miscalculations of the pickup’s power consumption .
By October 2021, the startup was walking around its Ohio manufacturing plant in hopes that someone with more capital would come in and help build the Endurance EV. Chinese manufacturing expert Foxconn inevitably answered the call, completing the sale last May along with news of a $100 million investment in Lordstown Motors to create an EV joint venture.
As Endurance pickups roll off the assembly lines in Ohio, Foxconn has announced further investment in Lordstown Motors and is moving some of those previously announced funds into storage to form a new EV development strategy.
Foxconn is upping its ante at Lordstown Motors to produce new electric cars
According to a press release from Lordstown Motors Corp. (LMC) today, Foxconn Ventures Pte. Ltd. agreed to invest up to $170 million in the electric car business in exchange for stock, board seats and other terms. Here’s how the new agreement breaks down.
Foxconn will make an additional equity investment in LMC in the form of US$70 million of the latter’s Class A common stock (US$0.0001 par value per share) and up to US$100 million of newly created Series A convertible preferred stock (0, 0001 USD par value per share). According to the release:
Upon completion of the investment transactions, Foxconn is expected to own all of LMC’s outstanding preferred stock and 18.3% of its common stock on a pro forma basis and will have the right to nominate two members of LMC’s board of directors.
Lordstown Motors said it intends to use the proceeds from the sale of common stock for “general corporate purposes,” while the proceeds from the sale of Foxconn’s preferred stock will fund development and design on a “new electric vehicle program.” The companies explained that Foxconn’s $100 million direct investment in preferred stock will replace the $100 million in joint venture funding pledged earlier this year:
Termination of an existing joint agreement: LMC and Foxconn have agreed to terminate the existing joint venture agreement between Lordstown EV Corporation and Foxconn EV Technology, Inc. The EV program and future vehicle development is expected to take place at LMC.
The deal is expected to close initially around November 22 and will include a number of terms such as voting and participation rights, plus board representation by two Foxconn nominees. Lordstown’s Endurance pickup is expected to go on sale before the end of the year and could soon be joined by additional EV models under the new development program funded by Foxconn.
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