Foxconn Just Doubled Down on Lordstown (RIDE) Stock. Here’s Why.
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Shares of Lordstown Motors (NASDAQ:RIDE) opened higher by over 20% after it was announced that Foxconn would invest up to $170 million in the electric vehicle (EV) company through common stock and newly created preferred stock. Shares of RIDE stock have since declined lower and are up by about 4% at the time of writing.
Foxconn has stated that it will purchase 12.9 million shares of RIDE on or after Nov. 22 at a price of $1.76 per share, which is a total value of about $22.7 million. The contract manufacturer will also purchase 300,000 shares of preferred stock at $100 per share. Furthermore, the company will purchase more preferred stock upon Lordstown meeting certain milestones.
Foxconn can only purchase 9.9% of Lordstown before needing government approval. Following government approval, Foxconn plans on buying an additional 26.9 million shares. If the measure is approved, Foxconn will own 19.3% of common stock and all preferred shares, making it the largest shareholder. Lordstown plans on using the proceeds toward a new EV program with Foxconn that will replace a previously arranged joint venture.
CEO Daniel Ninivaggi added, “Since announcing our first transaction with Foxconn more than a year ago, it has been our objective to develop a broad strategic partnership that leverages the capabilities of both companies. Foxconn’s latest investment is another step in that direction.”
RIDE Stock: Lordstown Receives $170 Million Investment
Last year, Foxconn purchased Lordstown’s 6.2-million-square-foot facility in Ohio for $230 million. As part of the deal, Foxconn also purchased $50 million worth of RIDE at $6.89 per share. The two parties entered into a contract agreement to help Lordstown manufacture its Endurance pickup truck and a joint venture to develop commercial fleet vehicle programs. Upon completion of the deal, Foxconn would receive 1.7 million warrants to purchase RIDE stock at $10.50 per share. Production of the Endurance began this September “at a very slow rate.”
The exciting news overshadowed Lordstown’s Q3 earnings, which came out this morning. The EV company reaffirmed that deliveries of the Endurance will begin during Q4 upon receiving all of the necessary certifications. On top of that, Lordstown reported another quarter of zero dollars worth of sales, while selling, general and administrative (SG&A) expenses totaled $60.1 million. That contributed to the quarterly operating loss of $154.8 million. Finally, the company expects to finish the year with between $150 million and $165 million of cash and short-term investments.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.