Electric vehicle start-up
needs cash and iPhone assembler Foxconn wants to enter the car business, so the two struck a win-win deal.
Late Thursday, Lordstown (ticker: RIDE) and
Hon Hai Precision Industry
(2317.Taiwan)—better known as Foxconn—announced an “agreement in principle.” Lordstown will sell its plant and then pay Foxconn to assemble electric vehicles.
Foxconn will buy $50 million worth of Lordstown stock and pay $230 million for the Ohio car plant. It will also get 1.7 million warrants to purchase more Lordstown stock at $10.50 a share.
Lordstown will then pay Foxconn to assemble its vehicles, though the terms are still being negotiated.
Adding it all up, the Foxconn deal should more than double Lordstown’s cash balance. Employee costs will drop, too. Lordstown’s manufacturing employees will move to Foxconn, but the company will have to pay Foxconn for assembly services.
Cash coming in the door is paramount for Lordstown these days. The company said back in May it needed more money to bring its trucks to market. After that, the company’s own accountants questioned Lordstown’s ability to continue operating as it has been without a major change. This deal qualifies as a major change.
Lordstown shares are up about 5% in premarket trading.
Dow Jones Industrial Average
are both down about 0.4%.
“We are excited about the prospect of joining forces with a world-class smart manufacturer like Foxconn and believe the relationship would provide operational, technology and supply chain benefits to our company,” said Lordstown CEO Daniel Ninivaggi in the company’s news release. “The partnership would allow Lordstown Motors to take advantage of Foxconn’s extensive manufacturing expertise and cost-efficient supply chain, while freeing up Lordstown Motors to focus on bringing the Endurance to market.”
Along with the Foxconn deal, Lordstown updated investors about its recent financial performance. The company is still building test vehicles in late 2021 and early 2022.
The company’s cash balance at the end of the third quarter is about $225 million, down from an expected $250 million. Lordstown has spent more on legal fees and R&D than it initially had expected. Lordstown was not immediately available for comment.
Foxconn, for its part, is moving into cars. It also has an agreement to build the second vehicle planned by
(FSR), which is due to hit roads around 2023.
Hon Hai stock is down 1.9% in overseas trading Friday.
Write to Al Root at [email protected]