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Lordstown announces reverse stock split amidst dispute with Foxconn
Author
Published May 23, 2023 15:54
© Reuters
Shares of electric automaker, Lordstown Motors Corp (NASDAQ:RIDE) slid about 4% in early trading Tuesday after the company announced a 1:15 reverse stock split of its Class A common stock, $0.0001 par value per share. The split will go into effect at 12:01 a.m. Eastern Time on May 24, 2023.
The reverse stock split was approved by the company’s stockholders at its 2023 Annual Meeting of Stockholders, held on May 22, with the final ratio determined by the company’s board of directors.
RIDE hopes the move will improve the marketability and liquidity of the Class A common stock. In addition, the Reverse Stock Split is intended to increase the per share market price of the Class A common stock in order to satisfy Nasdaq’s $1.00 minimum bid price requirement.
As previously reported, there is a disagreement between the company and Foxconn regarding the impact of the April 21, 2023 letter received by the company from Nasdaq concerning the bid price requirement. The dispute revolves around whether this letter resulted in a failure of a condition necessary for Foxconn's acquisition of approximately 10% of the company's common stock for $47.3 million. The company asserts that no closing condition was breached, and it was fully prepared to complete the transaction on May 8, 2023, as mandated by the investment agreement.
The company had earlier this month warned it might be forced to file for bankruptcy due to uncertainty over the investment from Foxconn. The company said it might have to stop making the Endurance pickup truck soon unless it finds a partner.
The EV startup had previously raised doubts about its ability to continue as a "going concern" as it was running low on cash balances.
Since the start of commercial production, the company has completed 56 Endurance vehicles and delivered 18 to customers. Notably, 12 of these deliveries occurred after resuming the distribution process in late April. As of April 30, 2023, the company possessed approximately $165M in cash, cash equivalents, and short-term investments. This amount reflects a decrease of roughly $11M compared to the previous quarter, which concluded on March 31, 2023.
Shares of RIDE are down 4.5% in mid-day trading on Tuesday.
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