Lordstown Motors Corp (NYSE:RIDE) shares are trading lower Tuesday after the company opted to file for Chapter 11 bankruptcy protection.
What Happened: Lordstown has initiated a strategic restructuring process in an effort to maximize the value of its assets.
As part of the process, Lordstown is commencing a sale process for its Endurance vehicle, citing “material and irreparable harm” done by Foxconn. In order to provide prospective buyers with a product that is free from any legacy issues, the company filed for bankruptcy.
Lordstown also said it filed litigation against Hon Hai Technology Group and Foxconn in the United States Bankruptcy Court. The complaint alleges fraud, bad faith and repeated contractual breaches that led to value destruction.
“Despite our best efforts and earnest commitment to the partnership, Foxconn willfully and repeatedly failed to execute on the agreed-upon strategy, leaving us with Chapter 11 as the only viable option to maximize the value of Lordstown’s assets for the benefit of our stakeholders,” said Edward Hightower, president and CEO of Lordstown.
“We will vigorously pursue our litigation claims against Foxconn accordingly.”
A dispute between Lordstown and Foxconn regarding Foxconn’s pending purchase of approximately 10% of Lordstown’s common stock had been ongoing.
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RIDE Price Action: Lordstown Motors shares are down about 90% over the last year.
The stock was down 59.9% at $1.11 at the time of publication, according to Benzinga Pro.
Photo: Trump White House Archives from Flickr.
