Shares of Lordstown Motors (NASDAQ:RIDE) are nearly 64% lower in pre-market trading after it was announced that the U.S. electric truck maker filed for bankruptcy protection on Tuesday and decided to put itself up for sale. The decision follows a dispute over a promised investment from Taiwan's Foxconn (TW:2354).
The automaker filed for Chapter 11 protection in Delaware and simultaneously took legal action against Foxconn.
In a complaint filed in bankruptcy court, Lordstown accused Foxconn of fraudulent behavior and repeatedly failing to fulfill their promises. According to Lordstown, Foxconn violated their agreement to invest a maximum of $170 million in the electric vehicle manufacturer.
Lordstown said in a regulatory filing earlier this month that they had planned to sue Foxconn after receiving a letter from the company that led Lordstown to believe Foxconn was unlikely to make its additional expected investment.
Foxconn has already invested around $52.7 million in Lordstown and currently holds an almost 8.4% stake in the EV maker. However, Lordstown claims that Foxconn is now refusing to fulfill their commitment of purchasing additional shares of Lordstown's stock as initially promised. Furthermore, Lordstown alleges that Foxconn misled them regarding their intention to collaborate on vehicle development plans.
Foxconn maintains that Lordstown breached the investment agreement when the automaker's stock fell below $1 per share.
On Tuesday, the Taiwanese company expressed that it had upheld "a positive attitude in conducting constructive negotiations with Lordstown" and added that the U.S. automaker had shown reluctance in fulfilling the investment agreement according to its terms. Foxconn said the company was suspending negotiations with Lordstown and reserved the right to pursue legal action.
Shares of RIDE are down 63.83% in pre-market trading on Tuesday.