Lordstown Motors, the bankrupt electric vehicle manufacturer, has put forth a Chapter 11 bankruptcy plan that outlines its intention to allocate the proceeds from the ongoing sale of its assets. The company, which shares its name with the Ohio town where it is headquartered, has indicated that it will prioritize other creditors over its shareholders, including Taiwan’s Foxconn, if the asset sale generates sufficient funds to cover its outstanding debts.
This Chapter 11 plan, filed in Delaware bankruptcy court, comes with a cautionary note stating that the value of Lordstown Motors’ assets is currently “necessarily speculative” and could potentially amount to zero. The company has set a deadline of September 8 for bids, with an auction scheduled for September 19.
See also: Lordstown Motors Files for Bankruptcy amid Dispute with Foxconn
While the plan does not specify the exact amount owed to creditors, previous court filings by Lordstown Motors indicated debts of approximately $20 million to 30 trade vendors. Additionally, the company recently agreed to pay $40 million to settle a trade secrets lawsuit filed against it by rival automaker Karma.
Crucially, even if the asset sale generates enough funds for shareholder payouts, Lordstown Motors has proposed that Foxconn, its estranged former business partner, would receive nothing for the 300,000 preferred equity shares it holds. Foxconn, also known as Hon Hai Precision Industry, is renowned for assembling Apple’s iPhones and had acquired Lordstown’s manufacturing facility as part of its foray into the electric vehicle market.
The rift between Lordstown Motors and Foxconn emerged when Lordstown sued Foxconn for failing to honor an agreement to invest $170 million in its electric truck business, citing a pattern of delays that hindered its operations. Lordstown alleged that Foxconn had only purchased $30 million of the $100 million in preferred equity shares outlined in the disputed investment agreement. Furthermore, Foxconn acquired $22.7 million worth of Lordstown’s common shares, amounting to approximately 8.4% of the company’s equity, according to court documents.
See also: Electric Vehicle Supplier Proterra Files for Chapter 11 Bankruptcy Amid Industry Challenges
Foxconn has countered Lordstown’s claims, asserting that its interpretation of the investment agreement was not flawed and that it had rightfully declined to inject additional capital into Lordstown’s struggling business. Foxconn had even sought the dismissal of Lordstown’s bankruptcy, a request that was denied by a U.S. bankruptcy judge on August 28.
Once valued at $5.3 billion, Lordstown Motors produced a mere 80 electric trucks before ceasing its operations, marking a significant turn of events in the electric vehicle industry.
