Lordstown agrees to sell the plant to Foxconn, which will also invest in the electric vehicle maker; capital gains


The shares of Lordstown Motors Corp. surged Thursday as the electric pickup truck maker agreed to strike a deal for its Ohio plant with Taiwan’s Foxconn Technology Group.

Lordstown RIDE,
+ 8.42%
the stock rose nearly 9% in after-hours trading after the deal was officially announced on Thursday, and gained 8.4% in the regular session following a Bloomberg News report that the two sides were “close to an agreement”. Thursday’s regular session gain pushed the stock to a 21.3% gain for September, its best monthly performance since January, when it rose 26%.

Lordstown and Hon Hai Technology Group 2317,
Foxconn’s parent company officially announced the deal at 6 p.m. EST on Thursday. The two sides have agreed to negotiate the sale of the plant, along with certain related assets, from Lordstown to Hon Hai for $ 230 million. This sale also depends on negotiating a contract manufacturing deal for Foxconn to manufacture the Lordstown electric truck at the factory, and Lordstown would lease space for Ohio-based employees once those deals are made.

Foxconn has agreed to purchase $ 50 million worth of Lordstown shares, priced at $ 6.8983 per share, and will also acquire warrants for an additional 1.7 million shares which may be exercised at a price of $ 6.8983 per share. $ 10.50 per share three years after the transaction closes.

“We are excited about the prospect of joining forces with a world-class intelligent manufacturer like Foxconn and believe this relationship would bring operational, technological and supply chain benefits to our business, accelerate overall vehicle production to the market. scale and would increase employment at the Lordstown plant. Lordstown Managing Director Daniel Ninivaggi said in a statement. focus on bringing Endurance to the market, developing service offerings for our fleet customers and designing and developing new innovative vehicles.

The report comes as Lordstown warned investors in June that it could run out of money, adding “going concern” language to a regulatory brief. Lordstown said at the time that he was looking for more investment.

The company revealed in a separate announcement Thursday that it will provide an update on its production schedule in a mid-November earnings report, though it still expects to manufacture “a limited number of vehicles. for testing, validation, verification and regulatory approvals during the 2021 balance and the first part of 2022. The company also revealed that it plans to spend more than it previously announced on administrative costs and research and development this year, and that the company’s cash balance at September 30 was $ 210 million to $ 240 million, down from $ 225 million to $ 275 million, as previously disclosed.

Foxconn, best known for making Apple Inc.’s AAPL,
iPhone and other notable electronics for several tech giants, announced in February an agreement with electric vehicle maker Fisker Inc. FSR,
The Ohio facility “will serve as a marketing asset that also supports” Fisker, the parties said in Thursday’s announcement.

Last year Foxconn announced an expansion that included working with electric vehicle companies and in January entered into a joint venture with Chinese automaker Geely Automobile Holdings Ltd. 175,
which sells Volvo vehicles and other brands.

“In addition to having achieved the objective of moving forward in our schedule to establish an electric vehicle production capacity in North America, [this partnership] also reflects Foxconn’s flexibility in providing design and production services for different electric vehicle customers, ”Hon Hai Chairman Young Liu said in a statement. “This mutually beneficial relationship is an important milestone for Foxconn’s EV business and our transformation strategy.”

In its August second quarter earnings report, Lordstown executives said the company was looking for “potential strategic partners” to use “the well-located 6.2 million square foot manufacturing facility and campus of 650 acres “of the company in Ohio. The factory would be large enough to accommodate other “manufacturing partners”.

The plant was previously owned by General Motors Co. GM,
who used it to make some of their compact cars. It was due to close as part of GM’s focus on more popular and profitable trucks and SUVs, but was later sold to Lordstown Motors in 2019. The plant is often leased across the street as an attractive asset and a reason to have a positive opinion of Lordstown. Stock.

The stock has boomed since the electric vehicle maker appointed Ninivaggi, a former Icahn Enterprises LP executive, at the end of August. He promised “absolute focus on execution”.

So far this year, Lordstown shares have lost over 60%, contrasting with gains of around 16% for the S&P 500 SPX Index,

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