Lordstown Motors Corp. (NASDAQ: RIDE), the maker of electric trucks, has a financial lifeline from a huge Chinese company. Foxconn will invest $170 million. The terms are not good for current inventors, but these investors might have ended up with nothing. Lordstown was falling apart. A small investment will not change that.
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Foxconn plans to have an electric vehicle (EV) joint venture with Lordstown. The Chinese company might have picked a larger, more viable company. Perhaps it passed on that opportunity because it would have been expensive. The joint venture is only vaguely explained, so its benefit to Lordstown is impossible to understand.
What is easy to understand is the transaction is close to a takeover. For the first $70 million investment, Foxconn will hold all of Lordstown’s preferred shares and 18.2% of the outstanding common shares. It will appoint two directors. Lordstown currently has eight directors.
The shares will be purchased at $1.76. This is just above the 52-week low.
In the year’s second half, Lordstown expects a loss and capital expenses to total $150 million. It will not start to deliver trucks until the fourth quarter.
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