LORDSTOWN, Ohio (WKBN) — According to a filing by Lordstown Motors Corp. (LMC) with the Securities Exchange Commission, the company plans to take legal action against Foxconn for not fulfilling part of their agreement.
LMC and Foxconn had a dispute over whether an April 19 Nasdaq letter regarding the Bid Price Requirement caused a failure of a condition in closing Foxconn’s purchase of approximately 10% of the company’s Class A common stock for $47.3 million.
LMC believes that there is no failure of any closing condition and that the Bid Price Requirement has been met and LMC remains ready, willing and able to close the transaction according to the agreement.
On June 5, LMC received a letter in which Foxconn acknowledged the agreement but couldn’t do it because of the recent reverse stock split.
“Foxconn’s interpretation would give Foxconn the right to purchase a windfall of over 60% of the Company’s Class A common stock for $47.3 million. The Company rejects Foxconn’s interpretation of the Investment Agreement and has so advised Foxconn in a letter dated June 7, 2023,” LMC wrote in the filing.
LMC stated further that it intends to take legal action.
“In light of Foxconn’s conduct, the Company believes that it is unlikely that Foxconn will complete the Subsequent Common Closing. The Company believes that Foxconn’s various breaches of the Investment Agreement and pattern of bad faith have caused material and irreparable harm to the Company. Absent a prompt resolution, the Company intends to enforce its rights through litigation,” the filing stated.
According to the Associated Press, Lordstown Motors warned in May that may fail as Foxconn gets “jumpy.” The company said then that it had received notice from Foxconn on April 21 about their investment agreement and a potential breach because it had gotten a delisting warning from Nasdaq two days earlier.