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Is Lordstown Motors About to Partner With a Key Apple Supplier?

By Neha Chamaria – Sep 30, 2021 at 12:26PM

Key Points

  • Lordstown Motors is trying hard to raise funds to survive.
  • It might be nearing a deal with Foxconn to sell a manufacturing plant.

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The embattled electric pickup start-up is reportedly in talks with Foxconn for an important deal.

What happened

Electric vehicle stock Lordstown Motors (RIDE -0.75%) surged today, trading up 8.8% as of 10:45 a.m. EDT after popping 21.3% earlier Thursday morning. 

The cash-strapped EV start-up doesn't have enough money to build its only pickup, but it might be able to raise funds someday soon, and that development has investors excited.

So what

On June 8, Lordstown filed an updated annual report which stated, among other things, that the company only had enough capital for "limited" production in 2021, and that the current cash and cash equivalents weren't "sufficient to fund commercial scale production and the launch" of its electric pickup, Endurance.

In other words, Lordstown knew it had to raise funds to be able to survive, and while the company postponed planned capital expenditures, it was also evaluating funding alternatives.

An executive shaking hands with a worker in a factory as a coworker looks on.

Image source: Getty Images.

This morning, Bloomberg reported that Lordstown is in talks with Hon Hai Precision (HNHPF -0.16%), which is better-known as Foxconn, to sell its assembly plant in Ohio and could announce a deal anytime now.

The 640-acre manufacturing facility that Lordstown acquired in 2019 from General Motors is also the only property it owns right now.

In August, Lordstown lifted investor hopes when it announced the Ohio plant was ready for production, and that the company expected to start limited production of Endurance by end-September. At the same time, Lordstown also stated the Ohio facility's size meant there was enough space for other manufacturers to use parts of it under a lease partnership while leaving enough for Lordstown to build Endurance and future models in the coming years.

It's not clear yet how much area or what parts of the plant Lordstown plans to sell Foxconn, but the potential to monetize a facility that the company may not have been able to use at full capacity anytime in the near future sounds like a plan.

Foxconn, on its part, confirmed in August it was looking for an EV facility in the U.S. with plans to start it by 2023. Foxconn, best known as Apple's leading device manufacturing supplier, partnered with Fisker earlier this year to build electric vehicles.

Now what

Lordstown Motors has been in the news for all the wrong reasons in recent months, including investigations into allegedly inflated production and demand numbers for Endurance, the abrupt exit of its founder in June, and the cash crunch that raised questions about the company's survivability.

The appointment of a new CEO in August helped Lordstown Motors shares reverse course after a precipitous decline, and today's update about the company finally finding ways to raise much-need money is driving the stock even higher.

Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Lordstown Motors Corp. Stock Quote
Lordstown Motors Corp.
RIDE
$1.33 (-0.75%) $0.01
Apple Stock Quote
Apple
AAPL
$148.11 (-1.96%) $-2.96
General Motors Stock Quote
General Motors
GM
$40.46 (0.87%) $0.35
Fisker, Inc. Stock Quote
Fisker, Inc.
FSR
$7.48 (0.27%) $0.02
Hon Hai Precision Industry Co., Ltd. Stock Quote
Hon Hai Precision Industry Co., Ltd.
HNHPF
$6.38 (-0.16%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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