Sales of Lordstown’s electric truck are expected to begin soon.
Courtesy Lordstown Motors
Stock in electric vehicle startup Lordstown Motors is rising because the company might sell its sole manufacturing facility to raise needed cash.
Lordstown (ticker: RIDE) stock was up about 6% in premarket trading. S&P 500 and Dow Jones Industrial Average futures were both up about 0.4%.
Bloomberg reported that Hon Hai Precision Industry (2317.Taiwan)–better known as iPhone assembler Foxconn–is interested in the plant. Neither company was immediately available to comment.
There are two reasons it is a big deal.
First, the sale would bring in cash for Lordstown. The company has said it needed to raise more capital to bring its electric truck, the Endurance, to market. Sales are expected to start soon.
The company raised about $600 million in a merger with a special-purpose acquisition company that closed in October 2020. At the end of the second quarter, the company’s cash balance was down to about $370 million. It’s a sizable sum, but car startups need a lot of money. Another EV startup, Fisker (FSR), had about $1 billion on its balance sheet at the end of the second quarter.
Second, Foxconn is a significant partner. It wants to build cars. In fact, Foxconn is working with Fisker on an electric vehicle. Fisker will design and sell the vehicle, while Foxconn will assemble it. Foxconn sees EV assembly as a growth business for it in coming years.
By selling the plant, Lordstown might morph its business model into one along the lines of Fisker’s. Fisker plans to outsource its manufacturing—at least early in its life as a company—to Magna International (MGA) and Foxconn. Until now, Lordstown, looked more like a traditional auto maker because it has a big manufacturing facility.
If a sale happens, Lordstown will have to pay for vehicle assemble, but it will have more cash and less spending requirements. Foxconn, for its part, would have a car-assembly facility it could use to expand its new business.
The Ohio plant Lordstown operates in was bought from General Motors (GM) back in mid-2019. The plant was idle at the time of the sale.
Lordstown investors have had a tough go lately. Questions about cash and what share of the vehicles preordered will actually be sold have punished the stock. The stock is down about 37% over the past six months. Coming into Thursday trading, shares were down 63% year to date.
Write to Al Root at [email protected]
