Shares of struggling electric vehicle (EV) start-up Lordstown Motors (RIDE -1.62%) have soared by nearly 60% since May 11, when it announced it had closed a deal to sell its factory and contract out its planned vehicle production. That agreement with electronics manufacturer Foxconn breathed new life into Lordstown -- or at least gave it the ability to keep operating.
The stock continued to gain ground Wednesday morning with a jump of more than 14% in early trading. But Lordstown shares then lost all of the session's gains, and were trading down by 2.1% as of 2:47 p.m. ET.
Some of that reversal was in line with a broader market sell-off that hit growth and technology stocks especially hard. But it also follows comments this week from Lordstown CFO Adam Kroll indicating that more capital will be needed beyond what it gained from the deal with Foxconn.
In comments reported by The Wall Street Journal, Kroll referenced a prior filing by Lordstown that noted it would need more capital to continue operating its business. The recently closed agreement brought $260 million to Lordstown in return for Foxconn taking ownership of factory assets and becoming the contract manufacturer for its planned Endurance electric pickup truck. It also created a $100 million joint venture between the two companies for the development of future vehicles using Foxconn's EV platform. The venture will be 55% owned by Foxconn, and the deal includes a $45 million loan to Lordstown for its initial investment.
But Kroll said this week that the company can't revoke its prior official notice regarding the continued operation of the business "until we raise sufficient capital and get to a higher market capitalization."
Specifically, Kroll said that another $150 million will be needed if the company expects to meet its goal of building 500 electric Endurance pickup trucks this year. Investors may have thought the deal with Foxconn would save Lordstown, but it seems that was only a temporary reprieve. Now investors will be watching to see if another round of financing can keep Lordstown afloat.