EV startup Lordstown Motors (RIDE) announced a reverse stock split Tuesday as it attempts to remain listed on the NASDAQ exchange and secure funding to keep the Endurance electric pickup alive.
Lordstown’s journey so far
After going public in 2020 via a SPAC merger under the ticker “RIDE,” Lordstown watched its valuation soar with heightening interest in EV makers.
Shortly after, Lordstown felt the pressure with a disappointing prototype and its CEO and CFO abruptly resigning. With the company falling into disarray, the fate of the Endurance was up in the air.
To make matters worse, Lordstown was running low on cash and had warned it would need funding several times to continue operations. Although Taiwanese manufacturing giant Foxconn stepped in, injecting several rounds of funds into the EV startup, Foxconn is now looking for a way out.
The news comes after Lordstown received a delisting notice from the NASDAQ in April stating the company has failed to maintain its minimum $1.00 stock price for 30 consecutive trading days.
As a result, Lordstown warned earlier this month that if it didn’t receive funding, “the company will be deprived of critical funding necessary for its operations,” adding it may need to “curtail or cease operations” or potentially face bankruptcy.
With Lordstown’s latest announcement of a reverse stock split, the EV startup is fighting to stay alive.
Lordstown announces 1:15 reverse stock split
According to Lordstown’s most recent press release, the 1:15 reverse stock split will go into effect when the market opens tomorrow, May 24.
For investors, this means for every fifteen shares of RIDE stock you hold, you will now have one. Your account will reflect the changes upon market open tomorrow. No fractional shares will be given. Instead, shareholders will receive cash equal to the fractional share amount.
The reverse stock split was approved by shareholders at its 2023 annual meeting and is “intended to improve the marketability and liquidity of Class A common stock.” In other words, it’s to remain listed on the exchange and attract investors.
Lordstown says if the stock price can remain above $1.00 for ten consecutive trading days, it “may satisfy Foxconn’s (incorrect) interpretation of the closing condition.” The company remains open but notes no agreement currently exists, and Lordstown cannot predict whether an agreement will be reached in the future.
Since starting production, Lordstown has built 56 Endurance vehicles, delivering 18 to customers. Given the dispute with Foxconn, Lordstown is taking “aggressive actions to reduce costs and preserve liquidity.” Foxconn had $165 million in cash and equivalents as of April 30, 2023, down $11 million from the end of Q1.
Lordstown’s stock is down over 10% in Tuesday’s trading session as investors take in the news.
Electrek’s Take
Lordstown is essentially throwing a hail mary at this point, hoping to resolve the dispute with Foxconn and remain listed on the NASDAQ exchange through a reverse stock split.
Although the stock split will boost the share price, there is no guarantee it will remain above the $1.00 price minimum. Investors are seemingly unhappy with the news, with Lordstown’s stock down 10% today to near-all-time lows of around $0.30.
With the fate of the Endurance once again up in the air, Lordstown is doing all it can to free up liquidity and stay in business.
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