Lordstown (RIDE) Inks Deal to Sell Almost 20% Stake to Foxconn
Lordstown Motors RIDE has agreed to sell a substantial stake to the electronics maker Foxconn Ventures. Upon the deal's completion, Foxconn will hold a stake of 18.3% of Lordstown's common stock and all of its preferred stock, and the total investment will be up to $170 million.
This will make Taiwan-based Foxconn the biggest shareholder in the loss-making company. Additionally, the agreement will provide a Foxconn affiliate the right to two board seats.
Foxconn will buy about 12.9 million shares of common stock at a purchase price of $1.76 per share, generating total proceeds of $22.7 million. Moreover, it will buy 300,000 shares of preferred stock at $100 per share, resulting in total proceeds of $30 million. The remaining shares of preferred stock will be purchased gradually as Lordstown Motors achieves some noteworthy steps. The deal also requires a review by the Committee on Foreign Investment in the United States. Upon approval, Foxconn will buy an additional 26.9 million shares of common stock at a purchase price of $1.76 per share, generating total proceeds of about $47.3 million.
A year ago, the EV truck manufacturer sold its Lordstown, OH, factory to Foxconn. The deal, valued at $230 million, included a direct investment of $50 million with which Foxconn agreed to aid Lordstown Motors in manufacturing its Endurance pickup truck. In September 2022, Lordstown announced that it started commercial production of its Endurance full-size pickup truck at the Foxconn EV Ohio plant.
The latest inflow of capital will enable Lordstown to use the sales proceeds to capitalize on developmental activities for a new EV program in collaboration with Foxconn. The previously announced joint venture will be done away with. This announcement saw RIDE’s shares climbing 7% to $2.06 in extended trading on Monday.
Lordstown went public by a special purpose acquisition merger in 2020, but the manufacturer has struggled to start production rolling. The company had a tough time from the beginning, worsened by accusations that it had misled investors about its demand and production capabilities. Last year, the company warned that it might run out of funds to bring its EV to market. Following the concern, it was bailed out by an investment firm that agreed to purchase $400 million worth of shares over a three-year period.
Despite the efforts, Lordstown’s struggles have been continuing. The Foxconn agreement has been the best scope to remain afloat amid supply chain issues hindering the production of its EV pickup. Materials costs have been quite high, and Lordstown intends to bring down production through 2023. In such a scenario, the recent announcement is expected to benefit the struggling EV maker.
The agreement will be Foxconn’s big push into the EV domain. Foxconn, a company best known for manufacturing Apple’s iPhone has been gradually channelizing investment in EVs and semiconductors.
Shares of Lordstown have lost 69.3% over the past year compared with its industry’s 40.9% decline.
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Zacks Rank & Key Picks
RIDE currently has a Zacks Rank #3 (Hold).
Here are some better-ranked players in the auto space – Allison Transmission Holdings ALSN, CarParts.com PRTS and Genuine Parts Company GPC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
Allison has an expected earnings growth rate of 25.4% for the current year. The Zacks Consensus Estimate for ALSN’s current-year earnings has been revised 3.6% upward in the past 30 days.
CarParts has an expected earnings growth rate of 45% for the current year. The Zacks Consensus Estimate for current-year earnings has remained constant over the past 30 days.
Genuine Parts has an expected earnings growth rate of 18.1% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 2.5% upward over the past 30 days.
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