Bankrupt electric ute start-up Lordstown outfoxed by tech giant report

A Taiwanese company with links to tech giant Apple could soon be the majority owner of an electric-car start-up in the US after a surprising move.

A large tech company with close ties to Apple may end up with a majority shareholding in struggling electric-car start-up Lordstown, after it outmanoeuvred the automotive firm in the lead-up to its recent bankruptcy.

New information has surfaced suggesting Taiwanese tech giant Foxconn – the world’s largest technology manufacturer, best known for assembling the iPhone for Apple – had promised to invest $US47.3 million ($AU71.1 million) for a total of 26.9 million shares, or approximately 10 per cent of Lordstown, Financial Times reports.

However, after the price of its shares dropped, Lordstown decided to perform what is known as a reverse stock split – which combines 15 shares into one – in an effort to avoid being delisted from the prestigious Nasdaq stock exchange.

In a letter dated 5 June 2023 to Lordstown – weeks after the Lordtown’s board approved the reverse stock split – Foxconn said its interpretation of the agreement with the US pick-up maker did not provide any provisions for a reverse stock split.

MORE: US electric ute start-up Lordstown files for bankruptcy

According to the Financial Times, Foxconn is arguing its agreement with Lordstown entitles it to the 26.9 million shares for $US47.3 million – which now equates to a majority share of 62.7 per cent, thanks to the board’s decision to perform a reverse stock split.

If Foxconn’s position is true – and the contract didn’t specify adjustments in the event of a reverse stock split – then it appears it may have been a major misstep by the young company, with Foxconn’s shrewd lawyers taking advantage of the contractual loophole.

The loophole could result in Foxconn buying the start-up electric-vehicle manufacturer at a heavily discounted rate.

Foxconn already has one electric SUV in production in Taiwan under the Foxtron brand, and the CEO has hopes to build 5 per cent of the world’s electric cars by 2025 – manufacturing vehicles for other brands, in the same way it assembles the iPhone for Apple.

MORE: Lordstown Motors under fire as short seller alleges misconduct

It’s not unheard of for third-party manufacturing companies to build cars on behalf of car brands. Austrian company Magna Steyr currently produces the G-Class four-wheel-drive for Mercedes-Benz, the Z4 convertible for BMW, and the Supra sports-coupe for Toyota, among other affiliations.

In October 2022, Foxconn unveiled an electric pick-up prototype, named the Model V.

It’s understood Foxconn had already paid $US230 million ($AU345 million) in exchange for buying the Lordstown factory in Ohio back in 2021, providing a crucial lifeline to the pick-up maker at the time.

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